US Stocks: Hedge fund stock pickers suffer in face of AI-related tech selloff, says Goldman

Hedge fund stock pickers have had one of their worst three-week periods since the first half of 2022, according to a Goldman Sachs client note seen by Reuters on Friday, as this year’s AI software-related tech selloff continues.

The S&P 500 software and services index has tumbled almost 18% ‌this year ⁠so ⁠far, shedding more than $1.2 trillion in market value, according to LSEG data.

Global hedge ​funds that pick long and short positions on stocks had lost roughly 2% of ​so-called “alpha returns,” or profits that come from a trading edge rather than from broader market gains.

Hedge funds, which often charge high fees, are meant to offer their investors returns which ⁠either beat ‌the market or act as a hedge when markets sell off.

A ​short position makes money when asset values fall, ⁠while a long position wins when they rise in ​value.

Speculative positioning in one of the most previously crowded ​trades involving U.S. software stocks has now fallen to record lows, according to the Goldman Sachs prime brokerage note, which tracks the trades of the hedge funds to which it lends money.
Hedge funds this month have net sold U.S. equities at the fastest pace ‌since March 2025, said the Goldman note, which was issued to clients on Thursday.Traders continue to short software ​stocks while ​buying the shares of ⁠companies that make microchips and electronic components related to technology.

Hedge funds have also turned bearish on U.S. consumer companies, both those that sell products ​considered essentials, as well as those that offer goods and services that benefit when consumers have extra cash to splurge, said Goldman.

U.S. healthcare stocks were the most bought equity sector since the start of this year up to February 19, said Goldman.