Hedge funds came under pressure on Friday as a sharp global sell-off in AI-related stocks triggered an unwind of crowded technology positions, according to the Financial Times.
Asian markets led the declines, with Japan’s Nikkei 225 falling more than 5%, while semiconductor and AI stocks across Japan, Taiwan and China sold off amid concerns over stretched valuations, geopolitical tensions and a higher-for-longer interest rate outlook.
Many hedge funds, heavily exposed to AI beneficiaries, were forced to reduce positions as volatility accelerated. Despite widespread hedging, brokers reported losses continued to build as selling intensified.
While many investors view the move as profit-taking after a strong 12-month rally, the correction highlights the concentration risk surrounding AI-focused trades.