$165B Exit Interview: Goldman and JPMorgan Spot the Leveraged AI Class Photo About to Break

Goldman Sachs and JPMorgan have both flagged that global hedge fund leverage is near multi-year highs, with JPMorgan estimating that quarter-end rebalancing could drive up to $165 billion in equity sales before June ends. Goldman's prime brokerage data has tracked leverage rising for over a year, with gross hedge fund leverage reaching about 294% in June 2025, a five-year high, according to Reuters. A note from Goldman trader Lee Coppersmith, circulated this month, said net leverage has since pushed to four-year highs, while JPMorgan strategist Nikolaos Panigirtzoglou warned that stretched positioning in semiconductors is raising the risk of more frequent selloffs, calculating that semiconductors' share of global equity value is now more than six times their share of revenue, over double the comparable figure for the Magnificent Seven.

JPMorgan attributes the near-term selling pressure to mechanical rebalancing tied to the end of the quarter. Japan's $1.9 trillion Government Pension Investment Fund is the single largest seller at about $60 billion, with US pension funds accounting for another $55 billion, Norway's and Switzerland's funds adding tens of billions more, and balanced mutual funds offsetting roughly $15 billion of buying. The Federal Reserve, under new Chair Kevin Warsh, held rates this month and signaled a possible hike this year, a hawkish stance that has repriced rate-cut bets and lifted volatility across equities.

JPMorgan also flagged that Bitcoin's network hash rate has grown more sensitive to price, a signal that more miners are operating near breakeven and adding a pocket of fragility to the crypto market. Bitcoin (BTC) traded near $63,620, with a market value of about $1.28 trillion, having slid toward the low $60,000s in recent weeks and weakening alongside equities as FOMC decisions and AI earnings rattled broader markets. With forced equity selling now positioned to collide with high leverage and crowded AI bets, cross-asset volatility is set to be tested into month-end.