Sales in AI Stocks Impact Hedge Funds Negatively

Hedge funds focused on Asian stocks are experiencing significant monthly losses following sharp sell-offs in AI-related companies. According to Goldman Sachs data, the average loss in July reached 18.6% as of July 28. The funds had performed well in the first half of the year with positions in South Korean chipmakers like SK Hynix and Samsung Electronics. However, the widespread sell-off in AI stocks reversed this trend. The funds' returns have declined by 21% after peaking at 40% on July 22. Heavy positions in AI were the main reason for the losses in July. Funds that invested more in AI stocks faced larger losses. Hedge funds have started to protect their profits and reduce risks amid increasing volatility. Asian funds reduced their positions for eight consecutive trading days as of July 27. Goldman Sachs' trading team noted a loss of momentum in U.S. stocks and an acceleration in position liquidations. The global total leverage is in the 93rd percentile of the last five years. Geopolitical tensions and Fed policies could increase market volatility. Goldman Sachs expects the rise in U.S. stocks to be limited in August due to seasonal fund outflows and weak institutional risk appetite. It is anticipated that systematic strategies may increase their sales in the event of a market decline. Goldman Sachs forecasts $24.9 billion in sales in a negative scenario and approximately $2.3 billion in purchases in a positive scenario. Companies' stock buybacks are emerging as the most stable buying support in the short term.