Hedge Funds Rush Out of Tech as Data-Center Doubts Hit the AI Trade

What happened

Hedge funds slashed tech exposure last week, making it the most aggressively net-sold sector both globally and in the US. Goldman Sachs said the percentage of net selling was roughly in line with the record back to 2016, and prime-broker figures as of Nov. 6 pointed to the most intense single-stock net selling seen in four months. The Nasdaq 100 logged its largest one-day market cap drop on record on Thursday, according to Bloomberg.

Why funds pulled back

The US midterm elections sparked worries about whether data-center expansion could slow, which would ripple into demand for chips and related infrastructure. As investors zeroed in on how much capacity might actually materialize over the next several years, tech took the hit. Selling in US industrials accelerated to its quickest rate since April 2020.

Positioning and the week's close

Positioning told the story. Gross leverage - total long plus short exposure - among US fundamental long-short funds dropped 8.7 percentage points to 207.5%, the steepest weekly fall since March 2020. Net leverage - long minus short - dropped by 3.7 percentage points to 43.3%, marking the largest weekly pullback since the week of "Liberation Day" in April 2025. There was a late-week shift, though: Goldman's equity trading desk said the week ultimately ended with funds as net buyers, driven mainly by Friday activity tied to covering macro positions like indexes and exchange-traded funds.

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The bottom line for investors

This is the AI trade meeting politics and plumbing. If data-center buildouts face pushback, expectations for chip and infrastructure demand get recalibrated, and positioning follows. Watch whether Friday's covering turns into sustained buying or was a one-day safety valve for leverage.

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