Hedge funds suffer 40% losses as popular longs get obliterated

The most popular long positions among hedge funds have cratered roughly 40% from their recent peaks, marking the sharpest drawdown in momentum factor baskets in five years. Meanwhile, the short side of the ledger offered no refuge either, as volatile whipsaws wiped out gains on positions that were supposed to hedge the downside. Goldman Sachs’ closely watched Hedge Fund VIP list, which tracks the stocks most commonly found in institutional long books, posted its worst one-month underperformance relative to the S&P 500 in over 20 years. That happened in July 2026, when a violent de-grossing episode forced funds to dump the very AI and semiconductor names that had made them look like geniuses just months earlier. The AI trade unravels July’s unwind was a theater moment. Hedge funds sharply reduced their technology exposure, particularly in semiconductors, memory stocks, and AI infrastructure names. Long trimming and short covering happened simultaneously, creating the kind of chaotic price action that turns quarterly letters into apology notes. Situational Awareness LP: a cautionary tale No single fund illustrates the damage quite like Situational Awareness LP, the vehicle manage...