Goldman Sachs notes say AI credit is pricing in a 15% drop for hyperscaler stocks and that hedge funds are capitulating on AI
"Trick Or Treat": Goldman's Spooky Chart Pack Shows AI Credit Pricing In A 15% Drop For Hyperscaler Stocks
Context
Signals from credit markets and hedge fund positioning show how much the AI selloff has spread, and whether Wall Street sees it as overdone.
This is secondhand: zerohedge and Kalshi are relaying Goldman Sachs client notes that are not public. Reuters separately reported figures from Goldman's prime brokerage unit on hedge fund losses.
Deep dive
On October 17, zerohedge posted that a Goldman Sachs chart pack shows AI credit pricing in a 15% drop for hyperscaler stocks. Its article says the note came from Goldman's Louis Miller on the custom baskets desk after a week in which CoreWeave stock fell sharply and the S&P 500 had its first day of a 1% drop alongside a 2% Nasdaq 100 drop since July. The full note is available only to paying subscribers.
That evening, Kalshi Finance posted that Goldman sees AI capitulation as hedge fund gains evaporate, matching a zerohedge headline about a note from Goldman's Mark Wilson. Zerohedge quotes Wilson saying the six day cut in hedge fund positions in global AI stocks is as extreme as anything since the launch of ChatGPT, and that he thinks this is the wrong time to give up.
Reuters reported that Goldman's prime brokerage unit said global fundamental long short funds lost money every day that week, down 2.9% for the week to October 15 and up 14.3% for the year. It said long short managers had sold global AI stocks for six straight sessions, and that Asia focused managers had erased more than half their gains from a late June peak.
Other coverage of Wilson's note says he expects any rebound to be driven by positioning until weaker AI credit, led by CoreWeave, stabilizes.
What to expect next
Watch CoreWeave's bonds and credit default swaps, which Goldman's notes treat as the weak point in AI financing, and whether hyperscaler stocks fall toward the drop credit markets imply.
Also watch hedge fund positioning data in the coming weeks to see whether the capitulation Wilson describes turns into a rebound. Nvidia's November 17 earnings and any change in rate expectations could decide whether the selloff deepens.