Hedge Funds, Mutual Funds Pile Back Into Tech Stocks, Favoring Semis Over Software: Goldman Sachs

• Hedge funds bought technology stocks last week at the fastest pace in nearly three months, a Goldman Sachs analysis said, according to CNBC.
• The weight of chip stocks in the hedge fund long portfolio is the highest on record, while the weight of Software is the lowest since 2019.
• Chip stocks are witnessing a record run, with SOXX up 77% year to date.

Chip stocks have surged this year, while software shares have also gained momentum in recent months, as AI continues to dominate the investment landscape. The rally appears to have reignited interest among large institutional investors, who are once again broadly piling into tech stocks, according to a new Goldman Sachs report.

Hedge funds and mutual funds are going “all in on AI,” moving toward semiconductor stocks, Goldman Sachs said, according to a report in CNBC.

“The weight of Semis in the hedge fund long portfolio is the highest on record, while the weight of Software is the lowest since 2019,” according to the analysis, which looked at positioning at the start of the second quarter using filings as of May 18.

In fact, hedge funds bought technology stocks last week at the fastest pace in nearly three months. Semiconductor manufacturers and software companies attracted the strongest demand, while IT services and communications equipment names were sold.

Among semiconductor stocks, hedge funds added to Lam Research Corp, Applied Materials Inc, and ASML Holding on net, while mutual funds added to Intel Corp and SiTime Corp, according to Goldman Sachs.

Hedge Funds Performance

U.S. equity hedge funds have benefited from the market rebound in the second quarter and returned 7% year-to-date through May 21, Goldman Sachs noted. However, the majority of mutual funds have struggled to keep pace with broader market gains — only 30% are exceeding benchmarks, compared with an average of 37% historically, the firm said.

Goldman’s report analyzed the holdings of more than 1,050 hedge funds with $4.6 trillion in gross equity positions, as well as over 500 large-cap active mutual funds with $3.9 trillion in equity assets.

Tech Sector Move

Chip stocks are leading the tech sector rally. The iShares Semiconductor ETF (SOXX) gained 77% year to date, driven by incredible gains in the memory stocks like SanDisk and Micron as well as legacy players like Intel. Micron, AMD, Intel, Broadcom and Nvidia together make up nearly 40% of SOXX’s total portfolio weighting.
 

In comparison, the iShares Expanded Tech-Software Sector ETF (IGV), which is heavily weighted toward software stocks, remains down 11% year to date, though the fund has staged a modest rebound over the past month. The iShares Global Comm Services ETF (IXP), which tracks communication services companies, gained 2%.

On Stocktwits, the retail sentiment was ‘extremely bearish’ for IGV, and ‘neutral’ for IXP and SOXX on Tuesday.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read Next: Why Is Micro-Cap MNTS Stock Surging 20% Overnight?