Goldman Sachs Warns AI Credit Risk Spreading Beyond Tech as Hedge Funds Exit at Decade High

According to Brian Garrett, senior derivatives trader at Goldman Sachs, credit risks from massive artificial intelligence capital expenditures have begun spreading beyond the technology sector into broader financial markets this week. Garrett noted that ultra-scale data center operators' credit spreads are widening and credit default swap costs are climbing, forcing new debt issuances to offer higher yields to attract buyers.

Goldman Sachs' prime brokerage data shows hedge funds have reduced U.S. technology stock positions at the largest scale in over a decade, with six of the past eight weeks showing net selling. The firm's proprietary panic index surged to above 6 this week from near 1—a level typically seen only during extreme market stress. Market structures are showing unusual signals: major semiconductor and technology stocks posted outsized daily swings, with individual volatility reaching 13% while trading volume declined, indicating investor stress without full portfolio adjustments yet.