As AI controversies escalate, hedge funds buy tech stocks at the fastest pace in 15 months

Just as tech stock bulls had rebuilt their positions, a new controversy over the future path of AI development has suddenly intensified, putting the market to the test at a highly inopportune moment.

According to Goldman Sachs Prime Brokerage data, hedge funds posted net buys of US TMT stocks in 10 out of the past 11 sessions, with long-side buying over the past two weeks reaching the 97th percentile of the past five years, and hitting their highest level since June 2025. Nearly all TMT sub-sectors recorded net inflows, led by semiconductors & semiconductor equipment, interactive media & services, and IT services.

However, a sudden AI policy dispute over the weekend quickly disrupted this momentum—Anthropic CEO Dario Amodei called for slowing the pace of frontier model development and advocated for government intervention to limit open-source competitors, with Trump immediately refusing to cooperate. The news sent South Korea's SK Hynix down 6% and SoftBank plunging 11%.

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

Goldman Sachs Prime Brokerage data shows that hedge funds have net bought the US TMT sector for a second straight week, with information technology and communication services becoming the two largest sector directions for cumulative purchases in the US, both dominated by long buying while short-selling flows remained relatively subdued.

Looking at cumulative two-week buying, this round of long positioning is the fastest since June 2025, ranking in the 97th percentile of the past five years, reflecting a significant pickup in risk appetite as the busy September meeting season kicks off.

Meanwhile, hedge funds' leverage structures saw some adjustments. Total gross leverage for US long-short funds dropped by 1.6ppt to 206.9% (20th percentile over the past year), while net leverage rose 1.7ppt to 50.2% (6th percentile over the past year). Fundamental long-short ratio (by market cap) rose 2.2% to 1.64 (26th percentile of the past year).

While piling into tech stocks, hedge funds also significantly net sold macro products (combined index and ETF positioning, typically used to hedge single-stock positions), with the sell volume the largest since the week of April 3 last year. The ratio of short selling to long buying hit 3.2:1, more than 2 standard deviations away from the one-year mean.

US-listed ETF short positions increased 7.2% week-on-week, marking the biggest one-week jump in six months, with a 5.2% increase from the prior week, largely concentrated in credit and small-cap equity ETFs. Though shorts rose sharply this week, overall macro product net short exposure is still below the YTD highs set when momentum trading peaked in June.

The crux of this episode lies in Anthropic CEO Dario Amodei’s latest comments : he advocated for slowing the pace of frontier AI model development and called for government action to limit competition from open-source models. Trump subsequently made clear he would not intervene, and the clash in their positions sharply heightened uncertainty over the future direction of AI regulation.

The event first rattled Asian markets, with Asia-listed AI stocks tumbling across the board Monday; SK Hynix dropped over 6%, while SoftBank fell as much as 11%. Given that hedge funds had only just rebuilt long tech positions at their fastest pace in 15 months, the timing of this dispute is particularly sensitive. Lee Coppersmith’s comments reinforce this view: risk to these newly-established tech longs has risen sharply in the short term.

Looking ahead to this week, Goldman Sachs data indicates market-implied odds of a Fed rate hike in September are at about 90%, making this the macro calendar’s main event. Last week’s stronger-than-expected core CPI data has been interpreted by the market as “ripping off the band-aid” in preparation for a hike. The Bank of England (Thursday) and Bank of Japan (Friday) will also announce rate decisions in turn.

Meanwhile, a $13 billion 20-year Treasury auction is set for Tuesday and warrants close attention. Against the backdrop of rebuilt tech long positions and uncertainty over AI policy, short-term market direction is becoming increasingly divided.