HedgeCo.Net — Hedge funds took one of their broadest hits in more than six years on Thursday as a renewed selloff in large technology stocks swept through crowded AI-linked positions. Goldman Sachs’ prime brokerage desk told clients that all three of the broad equity strategies it tracks fell more than 1% on October 22, the first time that has happened on the same day since the Covid-19 pandemic. “If last Thursday felt bad, today has been worse,” the desk wrote, according to Reuters.
The damage was spread across styles. Global fundamental long/short managers lost 1.4% on the day, their worst session since July 16, with telecom, media and technology specialists down an average of 2.7%. Systematic long/short managers fell 1.3%, their third-worst day since December 2023. Multi-strategy platforms, which are built to keep firm-wide drawdowns contained, slid 1.9%, their second-worst day since the April 2025 tariff selloff. Goldman estimated that more than two-thirds of the hedge funds in its prime book finished lower, as concentrated short positions were squeezed further in the second half of the session.
The trigger was renewed doubt about the payoff from AI capital spending. Meta Platforms fell about 7%, its largest drop since July, after saying it would issue a new class of shares to help raise funds, while Nvidia dropped roughly 4% and the Nasdaq Composite lost 2.6%. Bloomberg reported that the Nasdaq 100 fell 2.9%, its biggest decline since June, with worries over oil-driven inflation adding to the pressure. Market participants told Reuters the losses forced deleveraging as managers cut exposure to crowded AI trades.
October has now turned into a difficult month for equity managers. Goldman estimates global fundamental long/short funds are down 3.8% month to date, though still up 8.8% for the year. Technology-focused and Asia-focused funds were among the weakest through October 22, down roughly 10% and 9% respectively, and Asia fundamental long/short managers remain up about 14.2% year to date even after a 9.3% October decline.
For allocators, the pattern matters more than the single day. Losses that hit fundamental, quantitative and multi-manager books at once point to shared crowding in the same AI-linked names rather than isolated stock-picking errors. With third-quarter earnings season still underway and U.S. midterm elections approaching, the next test is whether managers can rebuild gross exposure without being forced to sell into further weakness.