Goldman Flags Record Tech Selloff as "Long AI, Short Everything Else" Trade Unwinds

Goldman Sachs' prime brokerage book recorded its largest-ever technology stock selloff last week, signaling a sharp reversal in the "long AI, short other assets" trade, said Rich Privorotsky, the bank's head of European fixed income and equity trading. Speaking on the "The Markets" podcast in London, Privorotsky said markets expect AI capital expenditure to reach $1.1 trillion next year, but scaling investment alone no longer convinces investors. As third-quarter earnings season unfolds, focus is shifting from AI narratives to whether order backlogs convert into revenue and when heavy spending delivers returns. Cloud growth, commercialization and the timing of free cash flow breakeven will drive valuations, particularly in credit markets sensitive to corporate financing costs. He estimated a power shortfall of 40 to 50 gigawatts next year could leave ordered chips unusable, while highly leveraged new cloud providers may struggle to fund AI investment. Privorotsky said the financial environment is shifting from "savings glut" to "spending glut," pushing up capital costs and widening stress for weaker borrowers, from CCC-rated credit spreads to sovereign debt. Investors are trimming AI exposure and rotating into bonds, though he noted spot compute prices remain at record highs and demand stays strong.