JPMorgan and Goldman Sachs warn elevated leverage and crowded AI trades could trigger sharp equity declines by quarter-end.
Global hedge fund leverage has climbed to a five-year peak, with gross leverage hitting 294% in June 2025. The surge raises concerns about forced selling if volatility spikes or quarter-end rebalancing triggers mechanical unwinds.
JPMorgan estimates up to $165 billion in equity sales could occur before June closes, driven by stretched positioning in semiconductors. The sector’s market value is now six times its revenue share, double the ratio for the Magnificent Seven stocks. Goldman Sachs data shows net leverage at four-year highs, amplifying risks in crowded trades.
Analysts warn that leveraged and concentrated bets in AI-related stocks could exacerbate pullbacks. Volatility breaches may force funds to sell, heightening downside risks in the near term.