Amid escalating AI controversy, hedge funds are buying tech stocks at a 15-month high.

Just as tech stock bulls were rebuilding their positions, a new controversy surrounding the development path of AI suddenly escalated, putting the market to another test at the most inopportune moment.

According to Goldman Sachs' block trade data, hedge funds have been net buyers of US TMT stocks 10 times in the past 11 trading days. The pace of bullish buying over the past two weeks is at the 97th percentile in the past five years and represents the highest level since June 2025. Almost all TMT sub-sectors recorded net buying, led by semiconductors and semiconductor equipment, interactive media and services, and IT services.

However, a sudden AI policy controversy over the weekend quickly disrupted this momentum—Anthropic CEO Dario Amodei called for a slowdown in the development of cutting-edge models and advocated for government intervention to restrict open-source competitors, a move Trump immediately refused to comply with . Following the news, SK Hynix's stock price fell 6%, and SoftBank's stock price plummeted 11%.

Goldman Sachs trader Lee Coppersmith stated bluntly in his weekly report: "Overall, this weekend, at the worst possible time, has brought new risks to newly rebuilt tech long positions."

Hedge funds are returning to tech stocks, with buying speed hitting a 15-month high.

Goldman Sachs' commodity brokerage data shows that hedge funds' net buying of the US TMT sector has continued for the second consecutive week. Information technology and communication services are the two sectors with the largest buying volume among all US sectors, and both are dominated by long positions, while short positions are relatively quiet.

Judging from the cumulative buying volume over the past two weeks, this round of bullish position building is the fastest since June 2025, ranking in the 97th percentile of historical data over the past five years, indicating that market sentiment has seen a significant rebound in risk appetite as the busy meeting season in September begins.

Meanwhile, hedge fund leverage structures have also seen minor adjustments. The total leverage ratio of US long-short funds decreased by 1.6 percentage points to 206.9% (20th percentile over one year), while the net leverage ratio increased by 1.7 percentage points to 50.2% (6th percentile over one year). The fundamental long-short ratio (market capitalization) rose by 2.2% to 1.64 (26th percentile over one year).

Macro hedge products were sold off on a large scale, and short positions in credit and small-cap ETFs surged.

While heavily investing in technology stocks, hedge funds also made large-scale net sales of macro products (combined positions in indices and ETFs, typically used to hedge single-stock positions). The scale of these sales was the largest since the week of April 3 last year, with the ratio of short selling to long buying reaching 3.2 to 1, deviating from the one-year average by more than two standard deviations.

Short positions in US-listed ETFs rose 7.2% in a single week, the largest weekly increase in six months, up 5.2% week-over-week, primarily concentrated in credit and small-cap equity ETFs. Despite the significant increase in short positions this week, overall short exposure in macro products remains below the year-to-date high – which coincided with momentum trading peaking in June.

The AI controversy intensifies at a crucial moment, with Asian tech stocks bearing the brunt.

At the heart of this controversy lies the latest statement from Anthropic CEO Dario Amodei : he advocates slowing down the development of cutting-edge models and calls on the government to intervene and restrict competition among open-source models. Trump subsequently made it clear that he would not intervene, and this clash of positions has dramatically increased market uncertainty regarding the future of AI regulation.

The incident first triggered a shock in Asian markets, with Asian AI stocks falling across the board on Monday. SK Hynix fell by more than 6%, and SoftBank's decline reached 11%. Given that hedge funds have just rebuilt their long positions in technology at the fastest pace in 15 months, the timing of this controversy is particularly sensitive. Lee Coppersmith's wording also confirms this assessment—the newly established long positions in technology face increasing risks in the short term.

FOMC decision and 20-year Treasury auction will be key variables next week.

Looking ahead to this week, Goldman Sachs data shows that the market is currently pricing in a 90% probability of a Fed rate hike in September, making it a key event on the macroeconomic calendar. Last week's stronger-than-expected core CPI data was interpreted by the market as a prelude to a rate hike. The Bank of England (Thursday) and the Bank of Japan (Friday) will also announce their interest rate decisions.

Meanwhile, a $13 billion 20-year Treasury auction will be held on Tuesday, which warrants close attention. Amidst the rebalancing of long positions in technology stocks and uncertainty surrounding AI policies, the market's short-term direction is increasingly diverging.

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