AI Trade Faces Rout Risk as Leverage and Crowding Flash Red

Industry Impact 4

โดย Bloomberg·Read original

Summary · why it matters

The artificial intelligence trade is threatening to snowball into a rout as stretched positioning and massive leverage create a treacherous landscape, according to Goldman Sachs partner Bobby Molavi. Molavi warned that the co-correlation of strategies feels great on the way up but can be extremely dangerous on the unwind, likening the current market to the final months of the dot-com era. Leveraged ETFs, accounting for about $200 billion in assets, trigger roughly $9 billion of same-direction rebalancing for every 1% move in the underlying index, with technology and momentum strategies making up about 85% of these funds. Nomura strategist Charlie McElligott said the AI trade has become a perpetual motion machine where rising prices and higher volatility feed market weightings, and volatility-control funds could sell $21 billion on two weeks of daily 1% S&P 500 moves or $41 billion on 1.5% moves. UBS strategists led by Gerry Fowler noted that some hedge funds have begun trimming exposure to crowded trades, warning that if capex upgrades abate, expensive and crowded positions could underperform.