AI selloff hammers hedge funds this week, Asia managers lead losses

By Summer Zhen and Anirban Sen

TOKYO, Oct 16 (Reuters) - Global hedge funds suffered steep losses this week, according to a Goldman Sachs prime brokerage note, battered by the violent unwind of a swathe of AI bets, with Asia-focused funds hit the hardest.

Investors are increasingly questioning whether massive AI spending can pay off anytime soon as elevated inflation keeps borrowing costs high.

Global fundamental long-short funds, or stock pickers, lost money every single day this week, Goldman Sachs said, with losses for the week to October 15 coming to 2.9%.

For the year to date, though, they have gains of 14.3%.

On Wednesday, hedge funds across strategies retreated sharply, with stock pickers globally losing 0.9%. Among them, Asia-focused managers were down 2.6%, while tech-focused funds were off 2.0%.

Global systematic long-short managers and multi-strategy funds also declined roughly 1%.

Hotter-than-expected US inflation data this week that increased expectations of further rate ⁠hikes also fuelled the selloff in semiconductor and AI supply chain stocks.

"From COVID through end-2025, all three broad strategies never fell more than 80bps on the same day," Goldman Sachs said, adding that this has now occurred three times this year, on February 4, July 28 and October 15.

Semiconductor-heavy markets bore the brunt of the selloff. South Korea's benchmark KOSPI .KS11 tumbled 8% to close at a ‌six-month low on Thursday, while Taiwan stocks also lost more than 3%.

Asia-focused stock pickers have lost 6.8% for the first half of this month and have erased more than half of the gains from their late-June peak, when they were up more than 40% for the year, according to Goldman Sachs.

(Reporting by Summer Zhen and Anirban Sen; Editing by Edwina Gibbs)

((summer.zhen@thomsonreuters.com; 852-3462-7739;))