Technology stocks have been sold by hedge funds for four consecutive weeks, Goldman Sachs traders: The era of "buy everything AI" is over!

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Hedge funds are systematically withdrawing from tech stocks. The latest data from Goldman Sachs shows that the tech sector has been net sold for four consecutive weeks, and Goldman Sachs traders have warned clearly: the market has moved past the "buy everything AI" logic and an era of differentiation is coming.

According to Goldman Sachs' latest weekly briefing, for the week ending July 2, hedge funds have net sold US equities for three consecutive weeks, mainly due to reductions in individual stock long positions. Long buying in macro products only partially offset this. Meanwhile, Goldman Sachs' high beta momentum portfolio (GSPRHIMO)—primarily composed of chip and memory stocks—suffered a cumulative decline of 19% in the past two weeks, with a historic two-day plunge.

Goldman Sachs trader Benny Quek summarized in the report: The current market mentality is still "buying the dip" rather than "selling the rally", but there is a key shift: this is no longer a "buy everything AI" market. "The market will reward quality and execution, rather than simply beta exposure." This assessment marks an important style turning point for the AI-themed trades that swept the market over the past two years.

Continuous Reduction: Hedge Funds Accelerate Exit from Tech Sector

Goldman Sachs data shows hedge funds have been net selling tech stocks for four consecutive weeks. Just a week ago, Goldman Sachs prime brokers reported that hedge funds sold tech stocks at record scale ahead of the Russell index rebalancing, sending both total and net exposures of the "Magnificent Seven" to their lowest levels this year.

For the week ending July 2, net selling pressure mainly came from reductions in individual stock longs. Long buying in macro products partially hedged, but failed to reverse the overall trend.

From the perspective of fund performance, Goldman Sachs' fundamental equity long/short strategy estimate declined by 1.53% from June 26 to July 2, while the MSCI World Total Return Index rose 1.67% over the same period, showing a noticeable gap. Alpha contribution was -1.42%, with losses on both long and short sides; beta contribution was -0.11%. Systematic long/short strategies performed worse, declining 2.09% over the same period, alpha contribution was -2.30% mainly due to losses from the short side, while beta contribution +0.21% partially offset the losses.

Chip Stocks Plunge: High Beta Momentum Portfolio Drops 19% in Two Weeks

In the past two weeks, the most affected was Goldman Sachs' high beta momentum portfolio (GSPRHIMO), mainly composed of chip and memory stocks, which fell 19% in two weeks, including a historic two-day crash last weekend.

Regarding the nature of this sell-off, Quek believes, it "is more like a result of quarter-end rebalancing, seasonal factors in summer, crowded positions, and trading style rotation, rather than a fundamental change in market mechanisms."

This assessment is crucial for investors: it means this adjustment in tech stocks is more about structural position clearing, and not a denial of the AI investment narrative itself.

Asia Flows: Record Sales in Japan, Chinese Funds Outperform Countertrend

In terms of regional flows, the Japanese market in June suffered the largest scale of net sales ever recorded, while the scale of sales in the South Korean market wiped out all net buying year-to-date.

By contrast, Asian fundamental long/short funds achieved about 7% monthly returns in June, outperforming the index (which fell about 1% during the same period). Drivers included short-term momentum, crowded longs, and tech bias, but Korean positions and volatility factors dragged on returns.

Notably, the scale of net selling across Asia in June almost completely reversed the record net buying wave in May. The rapid flow in and out reflects the market's current sensitivity to AI-related positions.

Style Shift: From "Buy Everything AI" to "Quality First"

Quek clearly pointed out that the market has entered a new phase—"'Buy everything AI' has ended, differentiation will return. The market will reward quality and execution, not beta."

For the follow-up of the AI narrative, Goldman's core conclusion is: signals of imbalance seen before the bursting of the 1990s tech bubble are not yet visible, strong earnings tailwinds can continue to drive investment enthusiasm; but risks are rising—if the market keeps extrapolating recent trends far into the future, valuation pressures will accumulate.

Among investors interviewed, there is a slightly optimistic view on risk assets overall. In terms of asset class preferences, developed market equities are the most favored, and credit bonds are the least favored.

Regarding S&P 500 index year-end targets, mainstream expectations are concentrated in the 7500-8000 points range (Goldman’s own forecast is 8000 points); the federal funds rate is expected at 3.5% to 3.75%.

On the biggest risk for AI trades and which sector most benefits from AI proliferation, client views are divided—this itself confirms Quek's description that "differentiation is returning."

Risk Warning and DisclaimerThe market has risks, investments require caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial situation, or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investments based on this are at their own risk. ```