AI Stocks Plummet, Wall Street Banks Demand Margin Calls from Hedge Funds

On July 29, AI concept stocks continued to plummet, and Wall Street banks have demanded some hedge funds to add collateral to maintain their leverage levels. Banks such as Goldman Sachs and JPMorgan Chase issued margin call notices to funds concentrated in specific sectors, with some requiring automatic execution of risk control mechanisms triggered by market volatility. Data shows that the Nasdaq 100 index has fallen 10% from its historical high in early June, entering a technical correction zone; SanDisk and Intel have dropped 53% and 39% from their year-to-date highs, respectively, while the Philadelphia Semiconductor Index has cumulatively declined about 25% since the end of June. A Goldman Sachs report noted that the total leverage of hedge funds in the first five months of this year saw the largest increase since 2016, indicating that many funds amplified their positions through borrowing during the AI market surge. As of Tuesday noon local time, long-short strategy hedge funds averaged a decline of 1.3%, while multi-strategy funds fell by 1.7%, marking one of the largest single-day declines since the pandemic in 2020, although hedge funds overall still recorded an average return of over 10% this year. Goldman Sachs disclosed that as of June 30, approximately 16% of its prime brokerage business's risk exposure was directly linked to AI memory chip stocks.

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