US Stocks: Hedge fund stock pickers are suffering from the sell-off in AI-related technology, Goldman says

Hedge fund stock pickers have had one of their worst three-week stretches since the first half of 2022, according to a Goldman Sachs client note seen by Reuters on Friday, as the sell-off in AI software-related technology continues this year.According to LSEG data, the S&P 500 software and services index is down nearly 18% so far this year, losing more than $1.2 trillion in market value.

Global hedge funds that pick long and short positions on stocks had lost roughly 2% of so-called “alpha returns,” or gains that come from a trading advantage rather than broader market gains.Hedge funds, which often charge high fees, aim to provide their investors with returns that beat the market or act as a hedge when markets sell off.

A short position makes money when the value of an asset falls, while a long position makes money when its value rises.

Speculative positioning in one of the previously buzziest trades involving U.S. software stocks has now fallen to a record low, according to Goldman Sachs’ prime brokerage note, which tracks the trades of the hedge funds it lends to.

Hedge funds sold net U.S. stocks this month at the fastest pace since March 2025, according to the Goldman note issued to clients on Thursday. Traders continue to short software stocks as they buy the shares of companies that make microchips and electronic components related to technology.

Hedge funds have also turned bearish on U.S. consumer companies, both those that sell products considered essential and those that offer goods and services that benefit from consumers having extra money to spend, Goldman said.

U.S. healthcare stocks were the most-bought stock sector since the start of this year through Feb. 19, Goldman said.