Is the sell-off of technology stocks, which has seen the fastest pace of decline and the biggest drop in history, coming to an end? Goldman Sachs reflects on the market's "cruel rotation."

Technology momentum trading is currently experiencing the most severe collapse in history. In just 17 trading days, the US stock market's technology momentum factor (TMT MoMo) has dropped 40% from its peak, setting the fastest and deepest retreat in history, affecting areas from semiconductors, hedge funds to credit markets. Mark Wilson, Goldman Sachs partner and head of EMEA hedge fund business, conducted a systematic review of this "brutal rotation" this week, pointing out that this round of selling is unprecedented in terms of speed and depth, but its root causes are more from factors such as crowded positions and concentrated leverage, rather than actual deterioration in the economy or corporate earnings. He stated that the unwinding process of the momentum factor is "nearing its end", but there is a lack of immediate catalyst for a reversal in the short term. Of note is that this round of momentum breakdown occurred against a backdrop of overall stability in macro and corporate fundamentals - US banks reported a 17% year-on-year increase in corporate loans, TSMC raised its 2026 revenue growth guidance to over 40%, and inflation data was modestly below expectations. The deviation between these fundamentals and market price behavior is currently the core contradiction in the market. Technology momentum factors face the most severe sell-off in history, with a retreat speed and depth surpassing historical median levels According to Morgan Stanley's Quantitative and Derivative Strategies team (MS QDS) data, this round of momentum factor retreat has lasted for 17 trading days, with a peak-to-trough drop of 28%. In comparison, the median historical retreat of momentum factors since 1999 is 22% and lasts an average of 33 trading days. This means that this decline has surpassed historical median levels in terms of speed and depth, making it the most serious one since the 29% pullback from December 2022 to February 2023. The situation in the technology sector is even more extreme. The TMT momentum factor (TMT MoMo) has dropped 40% from its peak, the fastest and deepest sell-off in technology momentum factor history according to MS QDS data. Looking at various sub-sectors, the South Korean composite stock index (Kospi) has dropped 27% from its peak, US AI technology beneficiary stocks have dropped 25%, global memory chip stocks have dropped 36%, and European semiconductor stocks have dropped 23%. Among them, memory chip stocks acco...