Hedge funds’ most popular long positions fell roughly 40% from recent peaks, marking the sharpest drawdown in momentum factor baskets in five years. The selloff intensified in July 2026 as funds reduced exposure to technology, semiconductors, memory stocks and AI infrastructure names. Goldman Sachs’ Hedge Fund VIP list, which tracks stocks most commonly held in institutional long portfolios, recorded its worst one-month underperformance relative to the S&P 500 in over 20 years. Situational Awareness LP, managed by former OpenAI researcher Leopold Aschenbrenner, lost approximately 67% in July, with assets under management falling from roughly $45 billion to about $10 billion. Margin calls from prime brokers including Goldman Sachs and JPMorgan forced the fund to sell most of its public-equity holdings, including Micron and SK Hynix, to Citadel at a discounted rate. Short positions also failed to protect portfolios as volatile market reversals erased gains. Despite the July losses, US equity long-short strategies remained up approximately 10% for the year through mid-August 2026. The episode reduced leverage and AI exposure across the industry, while the Goldman Sachs VIP list’s four-year low suggests that the popular hedge-fund trade has been more heavily unwound than at any point since mid-2022.