Insurance Funds Post Largest Short Squeeze on AI Fears: Tech and Software Stocks Lead as SPDRs and Put Options Surge

With escalating concerns over AI disrupting business models, insurance funds have significantly increased short sales in U.S. equities. According to Goldman Sachs' latest client report, short sales on a per-share basis reached a 20-year high in early January, with net short exposure twice that of net buying. From Jan 30 to Feb 5, short sales outpaced buying by two-to-one. The sell-off was triggered by the release of an automation tool by Anthropic, prompting a broad selloff in software, financial services, and asset management stocks. On that week, 164 stocks in these sectors, with a combined market value of $611 billion, were net sold off. Insurance funds have net sold U.S. stocks for four consecutive weeks, reaching the highest level since early April. Information technology was the hardest hit, with software stocks accounting for about 75% of the sector's net shorting, while semiconductors, equipment, and IT services saw net inflows. Meanwhile, healthcare outpaced industrial goods as the preferred defensive sector for insurance fund inflows this year. On Monday morning, U.S. futures were range-bound, with the S&P 500 futures briefly down 0.5% before narrowing, while the Nasdaq Composite posted its worst weekly performance this year.