Goldman’s Pasquariello says the tech sell-off raises doubts about AI stocks

Hedge funds sold technology stocks at their fastest pace in two years during Thursday’s market rout, according to Goldman Sachs’ Tony Pasquariello, as the Nasdaq 100 fell 2.9%. Pasquariello expects the bull market to continue but with less momentum, ahead of earnings reports from Microsoft, Alphabet and Amazon this week.

Analysis

The signal is more useful as a near-term market-structure warning than as evidence that tech fundamentals have turned: fast de-risking can amplify post-earnings moves as managers reduce gross exposure, but it can also leave fewer holders to sell if results are merely adequate. The key 1–3 month test is whether Microsoft, Alphabet, and Amazon convert earnings into durable demand and credible AI/cloud returns—not simply whether they beat estimates. Watch cloud growth, capex plans, and commentary on monetization; capex acceleration without clearer returns could pressure margins and spill over to semiconductor and data-center suppliers, while restrained spending could disappoint those suppliers even if cloud demand holds up.

Over 6–18 months, sustained capex discipline and monetization would support the leaders; weak returns on investment could trigger multiple compression across the AI trade. The contrarian risk is treating a positioning statistic as a fundamental catalyst: rapid selling may already have reduced crowded-long exposure, so a broadly reassuring earnings cycle could produce a sharp relief rally. The evidence provided does not establish which funds sold, whether selling was concentrated in these three companies, or whether exposure has since rebuilt. Verify subsequent positioning and price action before sizing a directional trade.

Key Decisions for Investors

• Avoid initiating a broad short solely on the reported flow. Into this week's reports, keep gross exposure measured and use post-earnings price reaction alongside cloud growth, capex, and monetization commentary to distinguish de-risking from deteriorating fundamentals.
• Watch for a relative-value setup after results: favor the company showing stronger cloud demand and credible returns on incremental AI spending; underweight the name whose capex rises without corresponding demand or monetization evidence. Do not pre-assign the winner before guidance is available.
• If the Nasdaq 100 fails to recover the rout's losses after earnings and guidance weakens across multiple leaders, consider a defined-risk, short-duration Nasdaq 100 put spread rather than an unbounded short. The thesis is falsified by a sustained recovery in the index alongside broadly solid guidance; reassess or exit if that occurs.
• If leaders deliver solid guidance and the index stabilizes, the flow reversal can support a relief rally. Avoid chasing the first bounce; look for follow-through and confirmation that selling has eased before adding exposure.