Goldman, JPMorgan issue margin calls as AI stocks plunge 10%

Goldman Sachs and JPMorgan Chase issued margin calls to hedge funds this week as the Nasdaq 100 fell 10% from its June record high into correction territory, according to people familiar with the matter.

"Hedge fund gross leverage increased by the largest cumulative amount on record in the first five months of 2026," Goldman Sachs said in a client report, citing data going back to 2016 when the bank began tracking the metric.

The Philadelphia Semiconductor Index has lost more than a quarter of its value since late June, with SanDisk and Intel down 53% and 39% from their respective peaks. The VanEck Semiconductor ETF fell another 3% in premarket trading Wednesday, while Micron Technology and Western Digital each slid about 5%. The selloff extended to Asia, where South Korea's Kospi sank 6.5% after recovering from a 13% intraday plunge, with SK Hynix dropping 10% despite reporting a 557% jump in quarterly profit.

The margin calls threaten to amplify the downturn as forced deleveraging could trigger further selling in AI and semiconductor stocks. About 16% of Goldman's prime brokerage exposure was tied to AI memory chip stocks as of June 30, the bank disclosed, while the S&P 500's top 10 constituents now account for roughly 40% of the index's market capitalization — exceeding the concentration seen during the dot-com bubble. The Federal Reserve's policy decision later Wednesday and earnings from Microsoft, Meta, Amazon and Apple this week will test whether the AI trade can stabilize.

Leverage Built Over Five Months Unravels in Two Weeks

The margin call wave reflects a rapid reversal of the leverage that hedge funds accumulated during the AI rally's first half. When the semiconductor selloff began in late June, those leveraged positions magnified losses, triggering automatic collateral demands from prime brokers. Long-short equity funds fell 1.3% on Tuesday while multi-strategy funds dropped 1.7%, according to people familiar with the matter.

Cross-Asset Contagion Spreads to Asia

The selling pressure cascaded across global markets overnight. South Korea's Kospi fell as much as 13% before paring losses to close 6.5% lower, with Samsung Electronics sliding 6.6% ahead of its Thursday earnings report. Japan's Nikkei 225 dropped 2.2%. Brent crude climbed 3.5% to above $87 a barrel after the U.S. intercepted an Iranian attack on its troops, reviving inflation concerns ahead of the Fed's decision. The U.S. 10-year Treasury yield held at 4.61% as traders priced in a steady Fed, while the dollar index edged 0.1% lower.

This article is for informational purposes only and does not constitute investment advice.