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HomeLatestHedge Funds Trim Holdings in Mega-Cap Tech Stocks, Seeking New Opportunities: Goldman

Hedge Funds Trim Holdings in Mega-Cap Tech Stocks, Seeking New Opportunities: Goldman

According to Goldman Sachs, the average US long/short equity hedge fund has seen an 8% return since the beginning of 2024, largely driven by the robust performance of several well-known stocks.


Excluding Tesla (NASDAQ:TSLA), the majority of top-performing stocks belong to the Magnificent 7 group, occupying the top six spots on the bank’s list of most popular long positions, collectively yielding a 16% return year-to-date.


However, in a sign of a broader equity market, hedge funds have opted to reduce their exposure to mega-cap tech stocks in pursuit of alternative alpha opportunities.


AAPL was the exception and screened into our Rising Stars list of the stocks with the largest increases in hedge fund popularity,” noted Goldman strategists in a Tuesday report.

“Funds continued to buy cyclicals, including lifting Financials to the largest tilt since 2012,” they added.

Joining Goldman’s ‘Rising Stars’ list of stocks are The Bank of New York Mellon (NYSE:BK), Discover Financial Services (NYSE:DFS), and S&P Global.

While trimming mega-cap exposure, hedge funds have also increased their investments in broader beneficiaries of artificial intelligence (AI), particularly those within the Phase 2 infrastructure – companies involved in establishing the necessary foundation to support AI growth beyond the initial phase.

Notably, stocks such as Marvell Technology (NASDAQ:MRVL), Synnex Corporation, AES Corporation (NYSE:AES), and Littelfuse (NASDAQ:LFUS) have witnessed the largest surge in hedge fund popularity within this segment, as per Goldman’s analysis.

Among the various phases of the AI trade, firms exposed to AI infrastructure investment have recently performed best and captured the most interest in our client conversations,” stated the strategists.

“As a result of this outperformance, the weight of Semiconductors in the aggregate US hedge fund long portfolio soared during 1Q to a record-high of 6.5%,” they highlighted.

Goldman identified MRVL as the top Rising Star among hedge fund investments, while also adding AI-focused memory chipmaker Micron (NASDAQ:MU) to their list of preferred long positions for hedge funds.