Hedge funds dump semiconductor stocks as market volatility spikes to decade highs
Major shifts are underway in global equity markets as institutional investors adjust their positions. New data from Goldman Sachs shows hedge funds and asset managers cutting back on semiconductor stocks after a strong rally. Meanwhile, broader market volatility has pushed short interest in key indices to a decade high.
The semiconductor sector, a standout performer in recent years, has seen heavy selling. Goldman Sachs’ AI semiconductor basket outperformed the S&P 500 by over 50% in 2025, but institutional managers have since turned net sellers. Chip stocks became the most net-sold US subsector last month, reversing earlier gains.
Hedge funds remain heavily exposed to AI-related equities within technology, media, and telecommunications. Their aggregate gross leverage has also hit a five-year peak, signalling increased risk-taking. To offset potential downturns, many have opened short positions in broad equity benchmarks and ETFs—short interest now sits at its highest level in ten years. Elsewhere, South Korea’s Kospi index briefly crossed 8,000 in mid-May, marking an 80% year-to-date surge before a sharp pullback. US markets have also shown signs of weakness, with the S&P 500 trading near 7,410, down around 0.31% on the day.
The semiconductor sector’s shift into net-sold territory reflects changing investor sentiment after months of strong gains. With hedge funds balancing high AI exposure against rising market risks, short interest in major indices has climbed to levels not seen in a decade. These moves suggest a cautious outlook as volatility persists.
