Goldman Sachs trading desk "inundated with calls but buyers are nowhere to be found": AI trading cools off due to midterm election results, Nasdaq loses over 2 trillions USD in a single day
Goldman Sachs' equity trading desk has been flooded with inquiries from investors—all asking the same question: how deep will the tech stock sell-off go? However, real buyers willing to step in are proving hard to find.
According to information from Zhihui Finance APP, on Thursday night in the US stock market, Goldman Sachs' equities trading desk was flooded with investor inquiry calls — everyone was asking the same question: How deep will the tech stock sell-off go? However, actual buyers stepping in to catch the falling knife were hard to find.
According to John Flood, Head of US Equities Execution Services at Goldman Sachs, Wednesday (midterm election day) was one of the firm’s busiest trading days of the year. But by Thursday, the situation had completely changed. "Today was the exact opposite," Flood wrote in a Thursday report to clients, "Our phones were blowing up with all sorts of market queries. Unfortunately, we haven't seen much (actual trading activity)."
Long-term funds freeze again, hedge funds sell off
Flood noted that long-only investment institutions have once again adopted a wait-and-see approach. These investors had aggressively reduced risk exposure ahead of the midterms, only to be caught off guard by Wednesday’s rebound and drawn back into the market—now hedge funds are selling the hyperscaler AI stocks they just bought the previous trading day.
What is even more worrisome for the market is the lack of buy-side activity. According to feedback from Goldman Sachs' clients, brokers with substantial retail exposure reported that retail investors have shown a significant net selling imbalance for the second consecutive day.
Selling pressure is cascading from the top down—investors are cutting exposure broadly via wide-base instruments. Data provided by Flood shows: SPDR S&P 500 ETF trading volume reached 160% of its 20-day average, Invesco QQQ (Nasdaq 100 ETF) trading volume was double its average, VanEck Semiconductor ETF volumes were 150% above average, while DRAM memory chip stocks saw a 75% volume surge.
"This feels a bit overdone," Flood wrote. "It's always darkest before dawn."
Trigger: Election politics collide with AI rally
The immediate trigger for the tech stock sell-off is the strong Democratic victory in the midterm elections and its potential impact on the AI-driven market rally of the past three years. Voters have strongly opposed building data centers in their own communities, and now that Democrats control both chambers of Congress, they are expected to hold hearings and launch inquiries on AI development.
The capital rotation that started in the semiconductor sector quickly evolved into a full-blown sell-off: all 11 major S&P 500 sectors closed lower, with information technology leading the decline — tumbling as much as 7% intraday; tech-heavy Nasdaq 100 fell 5.9%, losing more than $2 trillion in market value; the Philadelphia Semiconductor Index (SOX) dropped over 10% and is heading for its worst trading day since the pandemic outbreak in March 2020.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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