Goldman Sachs Says Asian Investors Overly Cautious on AI Trades

Goldman Sachs partner John Flood released a report on September 10 after a week-long Asia client tour, saying Asian investors are broadly skeptical of AI-related trades, with current caution exceeding what fundamentals can support.

Flood attributed the sentiment to the "psychological trauma" left by July's historic momentum-stock selloff. Despite the drawdown, Goldman's prime brokerage data shows Asian hedge funds are still up about 21% year to date. He said he was "shocked" by the widespread caution and skepticism among local investors.

Flood also said American investors may underestimate the actual adoption speed of China's open-source AI models, while Asian investors may overestimate it, with the outcome likely landing in between. He added that the upcoming IPO pipeline could act as a catalyst for institutional and retail investors to re-engage.

Goldman cited various positioning and sentiment indicators: retail investor sentiment has moved back into negative territory, the lowest since March; Nasdaq 100 futures short positions have risen 35% since mid-June; US fundamental long/short funds' gross and net leverage sit at the 20th and 6th percentiles over the past year; IT stock allocation has fallen sharply from June's five-year high; and mutual funds remain significantly underweight AI-related stocks.

Flood stressed a clear divergence between caution and fundamentals. In Q2 2026, S&P 500 EPS grew about 30% year over year, while hyperscalers and AI infrastructure beneficiaries grew earnings 54%, contributing roughly 50% of the index's EPS growth. Excluding energy, the rest of the S&P 500 grew 14%.