AI-Linked Selling Hits Hedge Funds, With Asia Funds Down 6.8%

Global fundamental long-short hedge funds lost 2.9% in the week through October 15 as investors pulled back from artificial intelligence-related trades. Asia-focused stock-picking funds took a bigger hit, falling 6.8% in the first half of October, according to Goldman Sachs data cited by Reuters.

The global funds recorded losses on each trading day of the week. In one session, Asia-focused funds fell 2.6%, technology-focused funds declined 2%, and global fundamental long-short funds lost 0.9. Systematic long-short and multi-strategy funds each fell about 1%.

The selloff also spread across Asian markets. South Korea’s KOSPI dropped 8% on October 15, closing at a six-month low, while Taiwanese equities fell more than 3%. The declines hit markets with significant exposure to companies supplying chips and other components for AI data centers.

Investors have questioned whether major technology companies’ heavy AI spending will deliver returns quickly enough. Hotter-than-expected US inflation data also raised expectations of further interest-rate increases, adding pressure to technology companies’ financing costs and valuations.

Despite the weekly losses, global fundamental long-short funds were still up 14.3% for the year through October 15. Asia-focused funds had gained more than 40% through the end of June, but their October losses erased more than half of the gains since their late-June peak, Goldman Sachs data showed.