Hedge Funds Weigh AI Competition as China Rises to Challenge US Dominance
Amidst the ongoing US-led AI boom, the emergence of China's AI model has ignited concerns about the sustainability of US dominance in the sector. Hedge funds are closely monitoring these developments, reassessing their bets on US tech stocks and related sectors.
According to a Goldman Sachs note, hedge funds have been reducing their exposure to tech stocks since last week. Data from the bank's prime brokerage desk indicates that hedge funds have sold both tech stocks and US companies in adjacent sectors, such as infrastructure providers.
Goldman Sachs notes that hedge funds have been reluctant to return to these sectors after selling off these stocks in large numbers in 2022. Despite the potential gains from a US-led AI boom, trade flows have consistently seen hedge funds selling stocks that would benefit from such advancements.
However, a small number of hedge funds that have held onto their positions now have the highest number of long positions in two years, suggesting that some are betting on a resurgence of US AI dominance.
Major tech firms, including OpenAI and SoftBank, have invested heavily in developing US AI infrastructure. Yet, competition from global players like DeepSeek has raised questions about the sustainability of US dominance.
Hedge funds are adopting a wait-and-see approach to US stocks related to the AI sector. Regulatory complexities associated with large-scale projects like Stargate AI and the lack of clear policy enforcement have made investors cautious.
As China's AI model continues to develop, hedge funds will closely monitor its impact on the US tech sector and adjust their investment strategies accordingly.