Last week, hedge funds sold U.S. tech stocks at a record pace: chip stocks were sold for eight consecutive days, and the Magnificent 7 were dumped for five straight weeks.

Last week, hedge funds’ sell-off of U.S. tech stocks reached the largest scale in over a decade, with the semiconductor sector experiencing net selling for eight consecutive trading days. The "Magnificent 7" tech giants have seen net reductions for five consecutive weeks, with positions approaching a three-year low. Meanwhile, U.S. tech stock funds also recorded historic weekly net outflows, with market sentiment cooling rapidly.

On June 29, latest data from Goldman Sachs Prime Brokerage showed that for the week ending June 25, hedge funds’ net selling of U.S. information technology stocks—measured both in dollar terms and proportion—was the largest in ten years, with a z-score of -4.0, an extremely rare event at a 4-standard deviation level. Overall U.S. equities also saw net selling for the second consecutive week, at the fastest pace since the week of the so-called "reciprocal tariffs" last year.

This round of selling has had a profound impact on market flows. U.S. stocks saw $8.5 billion in net weekly outflows, the first recorded outflow since March 2026, right after a record $119.2 billion net inflow the previous week. The S&P 500 fell about 2% that week, large-cap tech stocks dropped around 6%, and the semiconductor sector was particularly volatile.

Tech Stock Sell-off Reaches Decade High

The latest Goldman Sachs trading desk weekly report shows that last week, hedge funds’ net selling in the U.S. information technology sector stood out among all sectors, with a deviation from the one-year average at -3.8 standard deviations, driven by both long and short sales with a ratio of 1.3 to 1.

Within the information technology subsectors, semiconductor and semiconductor equipment stocks contributed over half of the net selling, followed by software, technology hardware, and communication equipment. Notably, the semiconductor sector has faced net selling for eight consecutive trading days, but in terms of positioning, its net exposure as a share of U.S. Prime accounts remains at the 98th percentile of the past five years, still indicating heavy portfolio weightings.

Meanwhile, EPFR data shows that after several weeks of significant net inflows, U.S. tech funds saw a large net outflow last week, further confirming the concentrated institutional capital retreat.

The "Magnificent 7" continued the trend of reductions last week, marking five consecutive weeks of net selling. Goldman Sachs data shows the group's total and net exposures are at the 4th and 6th percentiles of the past three years, both near three-year lows, reflecting a continued decline in hedge funds’ confidence in this core holding.

This round of selling comes as the AI and hyperscaler sectors are showing clear divergence from the semiconductor sector—the former seen as the "payer" for computing power, and the latter as the "beneficiary." The market’s reevaluation of AI investment return cycles, combined with stock-specific disturbances, has accelerated capital outflows.

The materials sector also ranked among the largest net-sold sectors last week, hitting the biggest single-week net sell-off in over three months, deviating from the one-year average by -1.9 standard deviations, with shorts to longs selling at a 1.5 to 1 ratio.

Metals and mining were the biggest sub-sector net sellers within the materials sector, with small net buys in container packaging and chemicals only partially offsetting this pressure. Currently, the U.S. metals and mining long-short ratio has dropped to 1.21, down sharply from this year's high of 1.69 in early June, at the 7th percentile for the past year and the 3rd percentile for the past five years, indicating extremely light positions.

In terms of overall structure, 8 out of 11 sectors saw net selling, with the largest net sells in dollar terms being information technology, communication services, industrials, and healthcare; consumer staples, energy, and real estate saw net buys.

In contrast, macro products (indices and ETFs combined) recorded net buys, deviating from the one-year average by +1.3 standard deviations, driven almost entirely by short-covering, with limited long inflows.

This pattern is consistent with typical hedge fund operations—shorting individual stocks while buying ETFs to achieve market-neutral hedging. U.S.-listed ETF short positions fell by 2% during the week and 3.5% for the month, with covering mainly concentrated in corporate bonds, small-cap, and consumer discretionary ETFs.

Explosive Volume at Week’s End Spurred by Russell Index Rebalancing

Goldman Sachs equity sales and trading desk pointed out that due to the Russell Index annual rebalancing last weekend, trading volumes saw an "explosive" surge.

The S&P 500 fell about 2% during the week, large-cap tech stocks dropped around 6%, and the semiconductor sector’s volatility was driven by multiple factors, including a weak Korean market, concentrated leverage trades, as well as stock-specific events such as Micron, ON Semiconductor, Qualcomm investor days, and reports related to an OpenAI IPO.

Asset management firms overall showed net selling, mainly driven by reallocating funds from large-cap tech stocks, but according to Goldman, the selling process was "orderly," with no signs of overreaction or panic. Hedge fund flows were roughly balanced, and sector rotation within the market continued.

Crude oil prices fell about 9% during the week, and the yield on 10-year U.S. Treasuries declined 8 basis points to 4.37%, providing some support to consumer-related sectors.

The materials sector also ranked among the largest net-sold sectors last week, hitting the biggest single-week net sell-off in over three months, deviating from the one-year average by -1.9 standard deviations, with shorts to longs selling at a 1.5 to 1 ratio.

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