Hedge funds reduced exposure to major U.S. tech stocks and increased bearish positions ahead of SpaceX's planned IPO, according to JPMorgan data. The Magnificent Seven stocks saw declines, while software stocks were sold and semiconductor makers garnered demand.
The shift in hedge fund positioning indicates a potential rotation out of growth-oriented tech stocks and into more defensive or cyclical sectors like financials and semiconductors, driven by anticipation of a major IPO and seasonal trends.
Hedge funds significantly reduced their exposure to major U.S. technology stocks and increased bearish bets in the week preceding SpaceX's planned initial public offering, according to data from a JPMorgan note. The group of stocks known as the "Magnificent Seven," which includes giants like Nvidia, Apple, Amazon, Alphabet, Meta, Tesla, and Microsoft, experienced declines. The Roundhill Magnificent Seven ETF, closely tracking these companies, fell over 2.4% since June 5.
Analysts suggest investors were de-risking their portfolios in anticipation of SpaceX's landmark listing, which aimed for a $1.77 trillion valuation, potentially making it the seventh-largest U.S. publicly traded company. The JPMorgan data indicated that while software stocks were heavily sold, semiconductor makers garnered strong demand. Financial sector-themed ETFs were the most bought over the past week, though hedge fund sentiment on financials was mixed, with some selling banks despite a seasonal tendency for financial stocks to perform well at this time of year. Funds also favored traditional asset managers over alternative ones.