What caused the market turmoil this week? Goldman Sachs partner: It's not the Fed, it's AI rebalancing.

```

The dramatic turbulence in global stock markets this week is not fundamentally caused by macro concerns surrounding the change of Federal Reserve Chair, but rather by an internal structural rebalancing within the AI investment boom—the cyclical nature of the storage sector, extreme hedge fund crowding, and a shift in market perception of the winners and losers in the AI industry chain, collectively forming the true driving force behind this volatility.

Mark Wilson, a partner at Goldman Sachs Sales & Trading, stated clearly in his latest report: Although macro signals have appeared during the early days of new Fed Chair Kevin Warsh’s tenure—such as a sharp drop in break-even inflation rates, rising real interest rates, and a strong dollar—he does not believe these are the fundamental causes of this week’s stock market fluctuations. He maintains his long-standing view: "At present, it is still the stock market driving macro, rather than macro driving the stock market."

This week's market turmoil in a snapshot: Korea's Kospi Index triggered circuit breakers twice, Microsoft fell to a 52-week low, and Amazon dropped below its 200-day moving average; the "Tech Seven Giants" (Mag7) have fallen more than 5% in aggregate since the start of the year, with Apple and Dell each plunging more than 5% in a single day. Meanwhile, Micron recorded a historic profit margin—showcasing an unprecedentedly clear divergence between beneficiaries and those under pressure in the AI supply chain.

Wilson's core conclusion: This volatility is not a signal of the end of the AI investment cycle—"We are still in the midst of a historic investment boom"—but rather the market is undergoing a profound revaluation of net winners and net losers within this surge.

Korea Becomes the Epicenter: Leverage Structure Amplifies AI Theme Vulnerability

The Korean market became the most concentrated outbreak of global AI trading volatility this week. The Kospi Index had risen about 100% year-to-date at its peak, but triggered trading halts twice this week. According to Wilson's statistics, half of all circuit breaker days in Korea this century occurred in 2026, and 20% of those happened just this week.

This extreme volatility has structural roots: About 60% of Kospi’s weight is concentrated in two stocks, supported by tens of billions in leveraged ETF copy products, so any large directional move is greatly magnified. More crucially, new expansion plans by Samsung and SK Hynix have awakened the market to the fact that the current historic high profit margins in the storage sector will ultimately face pressure from increased supply.

Wilson points out that while this is a net positive effect for the overall supply chain, it is a direct downward pressure for beneficiaries of the currently most crowded storage stocks.

Winners & Losers: Structural Repricing in the AI Industry Chain

This week’s market differentiation logic was particularly stark: Companies investing heavily or facing cost pressures were punished, while supply chain beneficiaries were continuously sought after.

Microsoft not only hit a 52-week low, but its stock price is now below its 2021 peak, meaning zero returns over the past five years; Amazon broke below its 200-day moving average. Mag7 as a whole is down over 5% year-to-date.

On the other end, terminal manufacturers like Apple and Dell had to announce substantial price hikes due to rising storage prices, passing the costs of Micron's record profit margins directly to consumers. Wilson summarizes this logic: "Companies that invest in AI (with returns still uncertain) and those facing margin compression have seen their stock prices punished; those benefiting from capital expenditure and price increases continue to see their stock prices appreciate."

Storage Cycle: The Hidden Risks Behind Record Profit Margins

Wilson believes Micron's evolution of profit margins will become a classic business school case study in the future, but the cyclical risks behind it must not be underestimated.

After the global financial crisis, the storage industry accelerated consolidation, systematically raising profit margins at the bottom of each downturn—a well-documented, strategically supported development with a clear investable logic.

However, with Micron’s margins at historic highs and SK Hynix's new expansion plans announced, Wilson warns investors: The industry remains fundamentally cyclical. As Samsung and SK Hynix's new round of capacity expansion gradually takes effect, current supply bottlenecks will be alleviated—this is a positive for the overall supply chain, but means real valuation pressure for the already heavily benefited and crowded storage stocks.

Hedge Funds: High Leverage and Extreme Crowding, Risks Accumulate to the Critical Point

Goldman Sachs Prime Brokerage Strategy Team’s latest position analysis reveals a deeper layer of risk behind this week’s market volatility.

The data shows multiple extreme signals simultaneously: Hedge fund total leverage has reached historic highs; since the start of the year, they have net sold US assets and aggressively bought Asian assets (mainly Japan and Korea); within AI-themed positions, net long positions in storage stocks are growing at twice the rate of those in semiconductors or utilities.

From a performance structure point of view, fundamental, systematic, and multi-strategy hedge funds have generally returned between 14% and 18% year-to-date—strong performances, but stark divergence: systematic and multi-strategy fund excess returns mostly come from non-AI assets, while fundamental fund returns rely almost entirely on AI themes, with non-AI positions contributing little alpha. US and Asian AI position performance relevance has now reached the historical 99th percentile, an extreme level; Europe is almost absent from this boom.

Wilson emphasizes that crowding alone is not sufficient reason for contrarian shorting, but once fundamentals change, extremely crowded positions will amplify downside risks—and Korea’s dramatic swings this week are a direct manifestation of this mechanism.

AI Boom Not Over, Pattern Quietly Reshaping

Wilson is firmly against interpreting this week's volatility as a turning point for the AI investment cycle. He believes that the increased volatility is sending a potentially profound signal: The landscape of net winners and losers in the AI investment boom is undergoing a deep transformation.

He also notes that political pressure on the AI narrative is rising. As the US midterm elections approach, AI's impact on employment will face more scrutiny. Data shows the proportion of jobs in the US tech sector has been in a downward trend for more than five years, attributed to accelerating job losses due to AI, and the industry has so far failed to present a compelling positive narrative in response.

The core message for investors from this round of turmoil: "It is no longer sufficient to simply generalize ‘AI beneficiaries’—there must be a refined distinction between capital spenders, those under margin pressure, and supply chain beneficiaries. This will be the key variable in investment decisions for the second half of the year."

Risk Disclaimer & Limitation of LiabilityThe market carries risks; investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial status, or needs. Users should consider whether any opinions, views, or conclusions herein fit their own circumstances. Invest accordingly, at your own risk. ```