Key facts
- Hedge funds have sold U.S. tech hardware and semiconductor stocks for four consecutive weeks.
- The SOX index declined 4.2% in the week to July 3.
- Hedge funds sold more stocks than they bought for the third week in a row.
- Investors also sold industrial and consumer discretionary shares.
- Hedge funds increased their holdings in index and ETF products, as well as commercial services, consumer staples, real estate, and energy stocks.
U.S. hedge funds have continued their sell-off of tech hardware and semiconductor stocks for a fourth consecutive week, according to a client note from Goldman Sachs. This trend aligns with a recent decline in global chip shares and precedes a period when many of these companies are set to report earnings.
Tech shares, particularly semiconductors, have been significant drivers of the broader equity market's gains this year. However, they have experienced considerable volatility due to profit-taking and concerns surrounding the substantial investments in artificial intelligence (AI) and the timeline for companies to see returns on these outlays. The SOX index, which tracks semiconductor stocks, saw a 4.2% decrease in the week ending July 3.
The Goldman Sachs note detailed that information technology stocks, including semiconductors and hardware companies, were the most net-sold U.S. stock sector for the fourth week running. Hedge funds sold more stocks than they bought for the third consecutive week, with a primary focus on single U.S. stocks. Other sectors experiencing sales included industrials and consumer discretionary shares.
Conversely, hedge funds bought index and ETF products, which typically track the broader market's performance. They also increased their positions in commercial services, consumer staples, real estate, and energy stocks. The note explained that hedge funds may sell stocks to close positions that were betting on price increases or as part of a strategy to bet on falling share values over time. Stockpickers returned 4% in June, with fundamental analysis funds posting an 18.4% return for the quarter, their strongest performance on record. However, losses stemmed from volatile markets in June, trading in a surging South Korean market, and getting stuck in short bets.