(Bloomberg) -- It was one of Wall Street’s hottest trades, but a trifecta of troubles has ushered in one of the steepest drawdowns for momentum stocks in years.

Momentum — a strategy that entails chasing winners and selling losers — had been the best-performing group over the past year among 12 factors tracked by Bloomberg. Last week, it was the worst as the US-Iran war and gloomy jobs data rattled investors already trying to cope with the prospect of AI disruption. An exchange-traded fund tracking global momentum stocks is down more than 2% early Monday, as the rotation out of high-flying stocks deepens.

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The trade had become incredibly crowded, with data on hedge fund positioning from Goldman Sachs Group Inc.’s prime brokerage desk showing that net exposure to medium-term momentum factor has reached the highest level in years and near the top of the range historically.

“The market is still heavily concentrated in the winners that have driven this cycle,” Lee Coppersmith, a managing director at Goldman, wrote in a weekend note. “That kind of crowding rarely matters on the way up, but it does tend to matter if/when leadership starts to crack.”

The collapse in momentum comes amid a wider selloff that’s pushed major US stock benchmarks into the red for the year, with equity futures pointing to further weakness on Monday as oil surged past $100 a barrel. Much of the pressure originated in software shares, where artificial intelligence advances stoked fear that AI would disrupt existing business models, sending some stocks spiraling toward double-digit declines.

To some equity pros, the washout looks like it’s close to a breaking point. The momentum factor on Wednesday notched its third-largest down day in two years and had reached a scope that in the past has been associated with temporary troughs before a rebound, according to a Barclays Plc analysis.

“We are in full-blown panic unwind mode, with price action across cross-regional stocks illustrating extreme levels of stress even if the index is not,” according to Alexander Altmann, global head of equities tactical strategies at the bank. Although a downside overshoot is possible, his team was “ready to call time,” after Wednesday’s factor move ranked in the 0.3 percentile of one-day swings over the past two years.

The war in Iran added to the turbulence, sparking worries of an energy supply shock, alongside existing AI jitters. Market agita was exacerbated further on Friday when the latest non-farm payrolls report showed US employers unexpectedly cut jobs in February and the unemployment rate rose, raising doubts about the health of the labor market at a time when the threat of inflation from rising oil prices looms.

From the Jefferies trading desk, Michael Toomey said the extreme moves in equities were inflicting “maximum pain,” while trading at levels that typically signal investors are throwing in the towel — particularly for the former high flyers. Last week’s three-day slide was the fourth-worst stretch in almost three years, by his analysis.

He’s keeping an eye on a number of contrarian indicators that seem to be signaling an imminent bounce: for one, crude reached deeply overbought territory. Also, the Cboe VIX Index curve fully inverted and hit the highest level since last April’s tariff shock, a threshold that historically has been associated with promising stock buying moments.

(Updates throughout with latest trading and additional commentary.)

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