Hedge funds have slashed holdings of US technology stocks by a record amount over the last two months, according to Goldman Sachs, as investors scale back exposure to AI-related companies following months of strong gains.

Goldman said the sector was sold in six of the previous eight weeks, resulting in an overall 10% reduction in hedge fund positioning, the steepest decline recorded by the bank’s Prime Services business.

The selling has been driven by sharp declines across semiconductors, memory manufacturers and AI infrastructure companies. Goldman said the prolonged weakness points to significant position unwinding and early signs of investor capitulation.

The technology sector has dropped around 10% since early June as concerns over elevated AI valuations prompted investors to rotate into other parts of the market.

According to Goldman, technology was both the worst-performing and most heavily sold US sector last week, with hedge funds trimming long positions and adding short exposure.

The largest outflows were seen in hardware, storage, peripherals and IT services, while software and chipmakers also experienced net selling. Goldman strategists said the recent turbulence has shifted investor attention away from AI infrastructure plays despite continued strength in the sector’s long-term fundamentals.