Nasdaq’s recent fall of 1.3% may seem like a minor setback, but the underlying dynamics reveal a more significant issue. According to Goldman Sachs’ AI versus AI at Risk basket, the plunge in the AI bellwethers’ call for restraint has led to a violent rotation in asset manager gross longs. Over the past three months, weekly changes in Asset Manager gross longs have become deeply negatively correlated with the AI versus AI at Risk pair, signaling that crowded Nasdaq longs remain vulnerable despite the lack of capitulation from the largest cohort.

The relationship between asset managers and AI profitability has been volatile in recent months, with questions around AI’s profitability intensifying. Despite this, Asset Managers have continued increasing their gross longs, suggesting that they may be overlooking potential risks. The recent message from the AI versus AI at Risk pair is clear: crowded Nasdaq longs remain vulnerable, and asset managers must be cautious in their investment strategies to avoid potential losses.

The rotation in asset manager gross longs highlights the importance of diversification and risk management in the current market. Asset managers must be aware of the potential dangers lurking beneath the surface of Nasdaq’s recent slump and take appropriate measures to protect their investments. By closely monitoring the relationship between asset managers and AI profitability, investors can gain a better understanding of the underlying dynamics driving market movements and make more informed investment decisions.