HONG KONG, New York (Oct 23): Global hedge funds were hit by a fresh tech reckoning this week, with major strategies posting their worst ​day since the COVID-era market rout.

A renewed selloff in big tech stocks, driven by ‌growing skepticism over the massive AI buildout spending, swept through global markets and dealt a heavy blow to global hedge funds.

"If last Thursday felt bad, today has been worse," Goldman Sachs' prime brokerage team said ​in a note sent to clients.

All three major strategies tracked by Goldman Sachs lost ​more than 1% on October 22, a first since the COVID pandemic, with losses ⁠spanning fundamental equity long-short, systematic and multi-strategy funds.

One catalyst for the latest selloff was Meta, ​one of the hyperscalers spending billions to build AI models, after the company said it ​would issue a new class of shares to help it raise funds.

Meta Platforms slumped 7% on Thursday, its largest drop since July. Nvidia tumbled 4%, while the broader Nasdaq Composite lost 2.6%, its largest ​decline since June 5.

Asian stocks, from South Korea to China, were also at the ​center of the selloff, pressured by higher oil prices and fears over hefty AI spending.

The downturn triggered deleveraging among hedge funds, ‌market ⁠participants said, as losses in crowded AI-linked trades forced investors to cut exposure and rein in risk.

Global fundamental long-short funds, or stock pickers, have dropped 3.8% so far in October, but are still up 8.8% year-to-date, Goldman Sachs estimates.

Performance was weighed down by losses on China ​and technology holdings, as ​well as a ⁠squeeze in crowded short positions, the bank said.

Tech-focused and Asia-focused hedge funds were among the biggest losers this month through to October 22, down roughly ​10% and 9%, respectively, according to Goldman.

Masaki Gotoh, a partner at ​Tokyo-based TriVista ⁠Capital, said the hedge fund had trimmed its hardware investments since late June.

"I'm actually a very strong believer in AI... But the concentration level is staggering. If you go back to ⁠the IT ​dotcom bubble, that had similar types of concentrations ​and we saw that happen. The circular financing is also a source of some concern," he said.

Uploaded by Siow Chen Ming