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The Yellow Jackets, which shot 61 percent from the floor in the first half, was led by a career-high 25 points from freshman Thaddeus Young.
"It seemed like we couldn't get a stop to save our lives in the first half. It seemed like they were making every shot," Roy Williams said. "Our defense wasn't as good, but at the same time, they made the shots that you have to make. At halftime I felt extremely lucky to be down seven."
Brandan Wright scored 22 points to lead Carolina, while Tyler Hansbrough added 16 points and 10 rebounds for the Tar Heels.
UNC controlled its own destiny prior to tip-off with regards to a potential ACC regular season championship by way of Virginia's defeat of Virginia Tech earlier in the evening. However, now the Tar Heels need a miracle to gain a top seed in next week's conference tournament, and they could slip as low as a fifth seed.
After bolting to a 20-2 start this season, Carolina (24-6, 10-5 ACC) has dropped three of its last five contests.
"We have responded very well (following losses)," Williams said. "But it's not just us bouncing back, if that's the case then the other team would roll over and play dead, and they don't do that in this league. Georgia Tech was sensational tonight."
Williams said he thought the game's outcome should solidify Georgia Tech (19-10, 7-8) as a NCAA Tournament team.
"I appreciate his comments, but we feel like we've got more work to do because of the whole we dug for ourselves," Yellow Jackets coach Paul Hewitt said. "But I do stand by what I say - I do feel that we're playing as well as anybody out there right now. And I don't say that if I don't think it's true."
The Tar Heels wrap up the regular season Sunday at home versus Duke.