Goldman Sachs: Hedge funds continue to go all in on the AI trade to start Q2 2026

Overview

Goldman Sachs' Hedge Fund Trend Monitor: All In on AI analyzes the holdings of 1,059 hedge funds as of the start of Q2 2026, covering $4.6 trillion in total equity positions, of which $3.1 trillion are long and $1.5 trillion are short. The report focuses on 13-F disclosures, hedge fund VIP longs, sector tilts, AI-related baskets, ETF usage, leverage, and short interest. The core conclusion is that hedge funds further concentrated into AI, semiconductors, and large-cap technology stocks after the market rebound, while managing risk through higher gross leverage, ETFs, and short positions.

Core views

First, hedge funds clearly added to the AI trade at the start of Q2 2026, especially stocks related to information technology, communication services, and AI infrastructure. Second, returns were primarily driven by market beta, popular technology longs, and momentum factor exposure, with popular information technology longs materially outperforming. Third, crowdedness and concentration remain high, and popular holdings have a larger impact on fund performance. Fourth, despite higher net exposure, the market still shows clear defensive risk signals, including high gross leverage, rising short interest, and short-selling pressure in defensive sectors. Fifth, ETFs are gradually becoming a more important long-exposure tool rather than merely a hedging instrument.

Analysis framework

The report uses 13-F holdings, Goldman Sachs Prime Services leverage data, FactSet, and market price data to compare hedge fund longs, shorts, sector tilts, position concentration, popular stocks, ETF holdings, and short interest across sections and historical percentiles. Its focus is not on issuing stock-level ratings, but on identifying hedge fund capital flows, crowded trades, AI rotation, and potential risk exposures.

Methodology notes

• 持仓跟踪13-F hedge fund holdings analysis

  13-F holdings analysis

  The report is based on 13-F filings available as of 2026-05-18 and observes fund holdings around 2026-03-31. This method is suitable for tracking public equity longs and some holding changes, but it cannot fully capture derivatives and undisclosed shorts.

• 热门多头篮子Hedge Fund VIP List

  Hedge Fund VIP List

  GSTHHVIP includes the 50 stocks that appear most frequently in the top ten holdings of fundamental hedge funds and serves as a proxy for the most important crowded long positions on the hedge fund side.

• 人气变化Rising Stars and Falling Stars

  Rising Stars and Falling Stars

  Hedge fund popularity changes are identified through increases or decreases in the number of fund holders. Historically, stocks with the largest increase in popularity have tended to outperform their sector peers in the following quarter, while the stocks with the largest decline in popularity have tended to underperform on average.

• 市场结构Leverage, short interest and concentration monitor

  Leverage, short interest, and concentration monitoring

  The report compares net leverage, gross leverage, short interest, and position concentration against historical percentiles to assess crowded trades, risk appetite, and potential drawdown pressure.

• 方法限制Data limitations of 13-F analysis

  13-F data limitations

  13-F does not require disclosure of options, swaps, futures, or other synthetic positions, and it does not fully cover international holdings or shorts, so it may overstate or understate a fund's true risk exposure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AI infrastructure stocks

  Core accumulation theme

  Strengths

  Benefit from new hedge fund buying, concentrated popular long positions, and the AI capital expenditure narrative, spanning semiconductors, data centers, inference, and optical networking.

  Weaknesses

  Crowdedness is increasing, and if AI expectations cool or earnings fall short, drawdowns could be swift.

  Comparison

  Compared with most non-TMT sectors, AI-related baskets saw a more pronounced increase in popularity in Q1 2026.

  Risks

  Valuation, crowded trades, momentum reversal, and reliance on lagged 13-F data.

• Semiconductors

  The most popular expression of the AI trade

  Strengths

  Semiconductors reached a record 10% weight in hedge fund long portfolios, and popular information technology longs performed strongly.

  Weaknesses

  Sector weighting is concentrated, with individual names such as AVGO contributing meaningfully to changes in the sector's net tilt.

  Comparison

  Popular information technology longs are up about 62% year to date, clearly outperforming the broader sector and the concentrated short basket.

  Risks

  If the AI hardware cycle slows, order expectations are revised down, or crowded positions are unwound, semiconductors could face substantial volatility.

• Mega-cap tech / Hedge Fund VIP stocks

  Core driver of hedge fund long performance

  Strengths

  AMZN, NVDA, GOOGL, MSFT, META, and others remain among the most popular longs; historically, the VIP basket has outperformed the S&P 500 in 59% of quarters.

  Weaknesses

  The VIP basket is not sector neutral; information technology carries a 36% weight, and high volatility is the price of its historical performance.

  Comparison

  The VIP basket is up about 13% year to date, versus 7% for the equal-weight S&P 500.

  Risks

  Sector concentration, concentrated factor exposure, popular-stock drawdowns, and delayed rebalancing.

• Financials

  One of the few sectors outside TMT that saw higher exposure

  Strengths

  The report notes that, aside from TMT, financials were a major sector where funds increased net exposure; WFC entered Rising Stars, and SPGI joined the VIP list.

  Weaknesses

  Financial services companies are also among the areas where short interest has risen recently.

  Comparison

  Compared with underweighted sectors such as energy, materials, industrials, and consumer discretionary, financials saw more meaningful inflows.

  Risks

  Interest rates, the credit cycle, regulation, and rising short interest.

• ETFs

  Market exposure and hedging tool

  Strengths

  ETFs rose to 4.9% of hedge fund long portfolios, and long ETF positions account for 35% of total ETF exposure, showing their growing importance as a rapid allocation tool.

  Weaknesses

  ETFs still account for 65% of total exposure on the short side, indicating that their hedging role remains significant.

  Comparison

  S&P 500 ETFs SPY and IVV are the most popular ETFs, together accounting for about half of hedge fund long ETF holdings.

  Risks

  Index crowding, passive liquidity shocks, and rapid changes in market beta.

• Concentrated shorts

  Risk management and counter-pressure indicator

  Strengths

  Short interest can reflect risk management, hedging demand, and market disagreement; short interest in defensive sectors is at historical highs.

  Weaknesses

  The most concentrated short basket is up 27% year to date, creating significant pressure for short portfolios.

  Comparison

  Median Russell 2000 short interest is about 6.4%, roughly twice the median for the S&P 500 and Nasdaq-100.

  Risks

  Short squeezes, market rebounds, insufficient liquidity, and crowded shorts.

Key data

• Number of sample funds1,059 hedge fundsThe report covers hedge fund equity positions at the start of Q2 2026.
• Total equity positions$4.6 trillionOf that amount, $3.1 trillion are long positions and $1.5 trillion are short positions.
• 13-F data dateAs of 2026-05-18The holdings mainly reflect filings around 2026-03-31.
• Fundamental long/short equity fund YTD return+7%As of 2026-05-21, based on GS Prime Services estimates.
• Hedge Fund VIP basket YTD return+13%Above the equal-weight S&P 500's +7%.
• Most concentrated short basket YTD return+27%Indicates a notable rebound on the short side as well and creates pressure for short portfolios.
• Information technology popular longs YTD return+62%Outperformed the broader information technology sector and the sector's concentrated short stocks by more than 30 percentage points.
• Quarterly change in information technology net tilt+853 bpThe largest quarterly increase on record for the information technology sector.
• Semiconductor weight in long portfolios10%A record weight in hedge fund long portfolios.
• Momentum factor exposure90th percentileThe tilt of hedge fund long portfolios toward the momentum factor is at the 90th percentile since 2001.
• Net leverage historical position85th percentileNet leverage for fundamental long/short equity funds is at the 85th percentile over the past five years.
• Gross leverage historical position94th percentileGross leverage has come down from its highs but remains elevated relative to the past five years.
• Median S&P 500 short interest3.0% of market capThe highest since 2011.
• ETF share of long portfolios4.9%The highest level since the global financial crisis.
• Long ETF positions as a share of total ETF exposure35%Shows that ETFs are increasingly being used for long market exposure.
• Top five most popular Hedge Fund VIP stocksAMZN, NVDA, GOOGL, MSFT, METAAMZN has ranked as the most popular long for 10 consecutive quarters.

Impact & implications

The key investment implication of the report is that AI and technology remain central to hedge fund performance, sector tilts, and crowdedness, with semiconductors, data centers, inference, and optical networking names seeing broader accumulation. If the AI trade continues to play out, popular longs and the VIP basket may retain their relative advantage; but if technology momentum reverses, high concentration, high gross leverage, and elevated short interest could amplify volatility. The higher ETF share suggests funds rely more on index tools when adjusting market exposure quickly, which may also transmit market beta changes into portfolio performance more rapidly.

Risks

• Hedge fund concentration in AI, semiconductors, and large-cap technology stocks is rising, and if momentum reverses, portfolio drawdowns could be amplified.
• Gross leverage is in the 94th percentile of the past five years, indicating that risk exposure remains elevated.
• Median S&P 500 short interest has risen to the highest level since 2011, which may reflect risk management needs but could also increase squeeze and volatility risk.
• The VIP basket and other highly concentrated baskets are not sector neutral, and their historical excess returns have come with higher volatility.
• 13-F data is lagged and does not fully cover derivatives, international holdings, or shorts, so it cannot fully represent a fund's real-time risk.
• Rising ETF usage may accelerate market beta adjustments and may also amplify synchronized trading during market stress.

What to watch

• Whether the number of fund holders in AI-related stocks continues to rise in subsequent 13-F filings, especially in semiconductors, data centers, inference, and optical networking.
• Whether the net tilt to information technology continues to rise after its record quarterly increase, or starts to mean-revert.
• Performance and valuation changes in core VIP holdings such as AMZN, NVDA, GOOGL, MSFT, META, TSM, AAPL, AVGO, and MU.
• Whether SNDK, LRCX, AMAT, and WFC among the Rising Stars continue to outperform sector peers.
• Whether MSFT and other Falling Stars continue to be reduced, and whether rotation within mega-cap technology broadens further.
• Whether GS Prime Services net leverage and gross leverage remain in high percentiles.
• Changes in median short interest across the S&P 500, Nasdaq-100, and Russell 2000, especially short pressure in defensive sectors and software and financial services companies.
• Whether the ETF share of longs continues to rise and whether index ETFs such as SPY and IVV play an even larger role in fund portfolios.