Hedge Funds Suffer Steep Losses Amid AI Stock Selloff

Global hedge funds suffered steep losses during the week ending October 15, 2026, triggered by a violent unwind of artificial intelligence bets. Goldman Sachs reported that global fundamental long-short funds lost 2.9% for the week, while quantitative funds endured their worst trading day since August 2026. The downturn marked the third time in 2026 that losses reached a magnitude not seen since the COVID-19 pandemic.

The selloff was driven by hotter-than-expected U.S. inflation data, which raised expectations for further interest rate hikes and led investors to question the immediate returns on massive AI spending. This shift caused hedge funds to liquidate AI stock positions at the second-fastest pace in a year, erasing all net AI buying gains accumulated since January 2025 within five trading sessions.

Asia-focused managers were hit hardest, with some declining 2.6% on Wednesday alone. Semiconductor-heavy markets saw sharp drops, including an 8% tumble in South Korea's KOSPI to a six-month low and a decline of more than 3% in Taiwan stocks. Asia-focused stock pickers have lost 6.8% in the first half of October, wiping out over half of the gains made since their late-June peak.