--- title: "Plunge in AI Stocks Triggers Margin Call Wave; Goldman Sachs and JPMorgan Chase Demand Collateral from Hedge Funds" type: "News" locale: "en" url: "https://longbridge.com/en/news/294146048.md" description: "Behind the margin calls lie the aftershocks of hedge funds significantly leveraging up during the first five months of this year. In a recent client report, Goldman Sachs noted that the cumulative increase in hedge funds' gross leverage ratio during this period marked the largest single cumulative rise recorded since the bank began tracking this data in 2016. Analysts believe this signals that the sell-off has spread to the credit and risk management levels" datetime: "2026-07-29T03:26:59.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294146048.md) - [en](https://longbridge.com/en/news/294146048.md) - [zh-HK](https://longbridge.com/zh-HK/news/294146048.md) --- # Plunge in AI Stocks Triggers Margin Call Wave; Goldman Sachs and JPMorgan Chase Demand Collateral from Hedge Funds The rapid decline in artificial intelligence stocks is triggering a chain reaction on Wall Street. Major banks such as Goldman Sachs and JPMorgan Chase have recently **issued margin calls to hedge funds with highly concentrated positions, requiring them to post additional collateral to maintain existing leverage levels.** Analysts believe this marks the spread of the AI sector sell-off from the market level to the credit and risk management level. The Nasdaq-100 Index fell as much as 10% from its early June historical high during Tuesday's trading session, briefly entering technical correction territory. **SanDisk and Intel dropped 53% and 39% from their peaks, respectively, while the Philadelphia Semiconductor Index has lost more than a quarter of its market value since late June.** This two-week-long sell-off has disrupted the heavy bets many hedge funds had placed on the AI sector, with long-short strategy funds and multi-strategy funds falling 1.3% and 1.7%, respectively, by midday Tuesday. On July 29, the Financial Times reported that **behind the margin calls lie the aftershocks of hedge funds significantly leveraging up during the first five months of this year. In a recent client report, Goldman Sachs pointed out that the cumulative increase in hedge funds' gross leverage ratio during the first five months of this year was the largest single cumulative growth recorded since the bank began tracking this data in 2016.** This implies that a large number of funds had significantly amplified their positions through borrowing before this round of declines, meaning losses would be magnified multiple fold once the market reversed. ## Margin Call Mechanism: Automatically Triggered by Market Volatility According to reports, insiders revealed that both Goldman Sachs and JPMorgan Chase have requested certain clients to supplement collateral. A source close to one of the banks stated: > "This is the risk management operation currently warranted by the market, belonging to fairly basic procedures." The source added that many margin calls were automatically triggered by market volatility, a mechanism typically written into the agreement terms between funds and banks. When providing financing to hedge funds, banks embed protective mechanisms to ensure they do not incur losses during market downturns. **Prime brokers help hedge funds lever up by providing leverage against stock portfolios as collateral, thereby amplifying returns.** However, once market movements go against the direction of a fund's holdings, leverage similarly magnifies losses multiple fold. Bank risk committees continuously assess the position status of hedge fund clients and decide whether to adjust or limit the scale of leverage provided to them based on these assessments. The report states that the deeper background of this wave of margin calls is the continuous rise in market position concentration to historical highs this year. According to Capital Group data, the top ten constituents of the S&P 500 Index currently account for approximately 40% of the index's total market value, exceeding levels seen during the internet bubble of the early 2000s. In another mid-year report, Goldman Sachs disclosed that as of June 30, about 16% of the exposure in its prime brokerage book was directly exposed to stocks related to AI memory chips. **This figure highlights that as position concentration in the AI sector rises, the risk linkage between banks and their hedge fund clients has become increasingly tight.** ### Related Stocks - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [GS-A.US](https://longbridge.com/en/quote/GS-A.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [GS-D.US](https://longbridge.com/en/quote/GS-D.US.md) - [GS-C.US](https://longbridge.com/en/quote/GS-C.US.md) - [JPX.US](https://longbridge.com/en/quote/JPX.US.md) - [JPMO.US](https://longbridge.com/en/quote/JPMO.US.md) - [.NDX.US](https://longbridge.com/en/quote/.NDX.US.md) - [SNDK.US](https://longbridge.com/en/quote/SNDK.US.md) - [INTC.US](https://longbridge.com/en/quote/INTC.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) ## Related News & Research - [QUICK SPARK: Goldman Sachs, JPMorgan Back Harvey After AI Legal Startup Adds $100M in Annual Revenue in a Single Quarter](https://longbridge.com/en/news/294099209.md) - [Hedge funds on track for another stellar year on AI boom](https://longbridge.com/en/news/294081102.md) - [Cumberland Partners Ltd Has $11.17 Million Holdings in JPMorgan Chase & Co. $JPM](https://longbridge.com/en/news/294026123.md) - [JPMorgan Chase voting rights in Puuilo fall below 5% to 4.97%](https://longbridge.com/en/news/294356322.md) - [JPMorgan Chase & Co. $JPM is Guardian Partners Inc.'s 7th Largest Position](https://longbridge.com/en/news/294336915.md)