Key Takeaways
- • Yahoo Finance counted 47 AI and chip stocks losing about $5 trillion in market value since October 6, with NVIDIA ($835 billion) and Alphabet ($835 billion) among the largest losers.
- • Morgan Stanley's prime brokerage data show hedge funds underweight the broad AI trade for the first time since early 2023, after cutting total stock exposure by more than 8% since June, the largest retreat since at least 2017.
- • Goldman Sachs data show hedge funds sold AI stocks for five straight days in October, selling existing holdings about 3.5 times faster than they opened new shorts on the peak day, which points to de-risking rather than a bearish call on AI demand.
- • Goldman Sachs says the unwind looks closer to its start than its end, with fund AI holdings still in the top 17% of the past three years.
- • NVIDIA's next earnings report, a date not yet confirmed but expected around November 17, is viewed as the key near-term catalyst for whether the sell-off stabilizes or accelerates.
Summary
Hedge funds have staged their largest retreat from stocks since at least 2017, according to Morgan Stanley prime brokerage data cited by the publication, and Goldman Sachs argues the unwind is closer to its beginning than its end. Yahoo Finance counted 47 AI and chip stocks that have lost roughly $5 trillion in market value since October 6. NVIDIA closed November 2 at $202.06, down 15.54% from its October 6 close of $239.24, its highest close of the past year. Invesco QQQ Trust fell 1.36% to $681.09, 10.34% below its October 6 high of $759.66. Alphabet, SpaceX and TSMC also ranked among the largest losers in the count, while 625 other large U.S. stocks added about $1.3 trillion over the same period.
Goldman Sachs data show hedge funds sold AI stocks for five consecutive days in October, reversing every AI purchase made since the start of 2025. On the heaviest day, funds sold owned shares about 3.5 times faster than they opened new short positions. Because a short position profits when a stock falls, the publication characterizes this pace as de-risking to protect gains rather than a bearish view on AI demand. Morgan Stanley's data indicate funds are underweight the broader AI trade relative to benchmarks, a position that typically limits further selling because fewer holders remain to sell. Goldman Sachs also noted that funds' AI holdings still rank in the top 17% of the past three years, and that the Magnificent Seven were net sold in four of the last five trading sessions. A Nomura note put hedge funds' sensitivity to those seven stocks at the 97th percentile as of October 26, indicating crowding remains high in mega-cap names.
The publication notes that household wealth is tied to the sell-off. Federal Reserve data show stocks made up a record 48% of household and nonprofit financial assets in the second quarter, up from 39% at the dot-com peak, and the richest 10% of households own 88% of stocks. Bank of America economists called a sustained correction in the AI trade "one of the larger risks to the US and global economy."
NVIDIA's fundamentals are stronger than its recent price action suggests, according to the article. Second-quarter revenue of $96.22 billion beat the $92.07 billion consensus, and the company guided third-quarter revenue to $108 billion, plus or minus 2%. NVIDIA is valued at $4.88 trillion and trades at roughly 13 times forward earnings. Because crowding remains elevated, a weak report on the unconfirmed November 17 date could trigger further selling. The article also cautions that even a beat may not halt the decline if the stock remains below its November 2 close, as bearish sentiment and broader market forces could push it lower first.
Goldman Sachs data show hedge funds sold AI stocks for five consecutive days in October, reversing every AI purchase made since the start of 2025. On the heaviest day, funds sold owned shares about 3.5 times faster than they opened new short positions. Because a short position profits when a stock falls, the publication characterizes this pace as de-risking to protect gains rather than a bearish view on AI demand. Morgan Stanley's data indicate funds are underweight the broader AI trade relative to benchmarks, a position that typically limits further selling because fewer holders remain to sell. Goldman Sachs also noted that funds' AI holdings still rank in the top 17% of the past three years, and that the Magnificent Seven were net sold in four of the last five trading sessions. A Nomura note put hedge funds' sensitivity to those seven stocks at the 97th percentile as of October 26, indicating crowding remains high in mega-cap names.
The publication notes that household wealth is tied to the sell-off. Federal Reserve data show stocks made up a record 48% of household and nonprofit financial assets in the second quarter, up from 39% at the dot-com peak, and the richest 10% of households own 88% of stocks. Bank of America economists called a sustained correction in the AI trade "one of the larger risks to the US and global economy."
NVIDIA's fundamentals are stronger than its recent price action suggests, according to the article. Second-quarter revenue of $96.22 billion beat the $92.07 billion consensus, and the company guided third-quarter revenue to $108 billion, plus or minus 2%. NVIDIA is valued at $4.88 trillion and trades at roughly 13 times forward earnings. Because crowding remains elevated, a weak report on the unconfirmed November 17 date could trigger further selling. The article also cautions that even a beat may not halt the decline if the stock remains below its November 2 close, as bearish sentiment and broader market forces could push it lower first.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.