AI selloff hammers hedge funds this week, Asia managers lead losses

TOKYO: Global hedge funds suffered steep losses this week, according to a Goldman Sachs prime brokerage note, battered by the violent unwind of a swathe of AI bets, with Asia-focused funds hit the hardest.

Investors are increasingly questioning whether massive AI spending can pay off anytime soon as elevated inflation keeps borrowing costs high.

Global fundamental long-short funds, or stock pickers, lost money every single day this week, Goldman Sachs said, with losses for the week to Oct 15 coming to 2.9 per cent.

For the year to date, though, they have gains of 14.3 per cent.

On Wednesday, hedge funds across strategies retreated sharply, with stock pickers globally losing 0.9 per cent. Among them, Asia-focused managers were down 2.6 per cent, while tech-focused funds were off 2.0 per cent.

Global systematic long-short managers and multi-strategy funds also declined roughly one per cent.

Hotter-than-expected US inflation data this week that increased expectations of further rate ⁠hikes also fuelled the selloff in semiconductor and AI supply chain stocks.

"From COVID through end-2025, all three broad strategies never fell more than 80bps on the same day," Goldman Sachs said, adding that this has now occurred three times this year, on Feb 4, July 28 and Oct 15.

Semiconductor-heavy markets bore the brunt of the selloff. South Korea's benchmark KOSPI tumbled eight per cent to close at a ‌six-month low on Thursday, while Taiwan stocks also lost more than three per cent.

Asia-focused stock pickers have lost 6.8 per cent for the first half of this month and have erased more than half of the gains from their late-June peak, when they were up more than 40 per cent for the year, according to Goldman Sachs.