Goldman Sachs Warns of AI Stock Trade Downturn

Goldman Sachs warned that the crowded Magnificent Seven AI stocks could become a primary source of funds for investors after the AI trade experienced a significant downturn in October. Data from the investment bank shows that TMT-focused hedge funds lost 11.9% during the month.

The Nasdaq 100 recorded its worst underperformance relative to the equal-weighted S&P since 2002. Conversely, the S&P excluding AI stocks rose 7.64%, marking its strongest monthly performance since the launch of ChatGPT.

Market momentum shifted away from AI-centric assets toward broader market indices. The semiconductor index fell below its 200-day moving average for the first time since June 2025, signaling a broader breakdown in the AI trade.