LONDON (Reuters) - Big investors, fearful of September's typical seasonal declines, exited profitable stock positions on Tuesday, according to investors and trading company research, a sign the selloff in tech may be driven by a broad aversion to risk. The tech-heavy Nasdaq and broad S&P 500 stock index sold off sharply on Tuesday, driven by tech stocks that have rallied hard for much of the year. Nvidia sank 3.5%, the biggest drop in nearly four months. "This week’s tech sell-off looks less like panic and more like a broad reshuffling of risk," said Bruno Schneller, managing director at investor Erlen Capital Management.

"We’ve seen crypto, high-beta tech and the AI beneficiaries all come under pressure at the same time, which suggests investors are cutting exposure across multiple risk assets rather than reacting to a single headline." A momentum shift was taking place, noted two other hedge fund investors, declining to be named because they were not authorised to speak publicly. Hedge funds and asset managers were selling their winners, they said. This theme played out earlier on Wednesday in Korean technology stocks and China biotech-related equities, one of the sources said. Currently, systematic traders such as hedge funds and trend followers have bought all the stock they had planned to and further appetite to push equities higher has petered out, Citadel Securities said.

"The final week of August often coincides with low volumes due to vacations, and barbeques contributing to upward drift in stocks, especially in low-volume environments," said Rubner.