Goldman Sachs's brokerage business data shows that judging from last week's situation, hedge funds considered “smart money” have not lost their risk appetite for technology stocks. This group snapped up technology stocks at the fastest speed in over a year, and net purchases of technology stocks were the largest since December 2022, mainly driven by an increase in long positions and short compensation. This is also the fourth consecutive week that hedge funds have made net purchases of technology stocks.
In fact, the S&P 500 information technology index was weak until last week, falling for most of April, mainly because investors feared that the Federal Reserve would keep interest rates high for a longer period of time.
However, along with the optimistic performance of Google's parent company Alphabet, Microsoft, etc., it has strengthened investors' optimism about the fundamentals of large technology companies. Continued buying by hedge funds recently seems sensible. The S&P 500 Information Technology Index surged 5.1% last week, ending four consecutive weeks of decline and the longest weekly decline since September last year.
Almost all technology sub-industries have seen capital inflows, but purchases are mainly concentrated in semiconductors and semiconductor equipment companies. The allocation of hedge funds in the semiconductor subcategory increased from 1.1% at the beginning of this year to 4.4%, the highest level in more than five years.
The stock price of Nvidia, which has received the most attention in the semiconductor sector, surged more than 6% last week, surging 15% throughout the week, the biggest increase in 11 months. Although it has yet to release financial reports, it is “better than an announcement,” and many giants have promised large-scale artificial intelligence investments, making Nvidia highly sought after.
Chip stocks accelerated their upward trend on Friday after rising against the market overall on Thursday. The Philadelphia Semiconductor Index and semiconductor industry ETF SOXX rose for five consecutive days and outperformed the US stock market on the 5th. Last week, they climbed about 10% and 9.3% respectively, smoothing the previous week's decline of at least 9%. Compared with that, the S&P 500 index had a cumulative increase of 2.6% last week, and the NASDAQ 100 had a cumulative increase of nearly 4%.
Goldman Sachs analysts such as Vincent Lin said that earnings surpassed sentiment. Apart from the release of Meta, whose outlook was lower than expected, other giants did not constitute a major drag on the S&P 500 index.
Analysts believe that the long-term potential of technology companies is quite clear and almost unquestionable. However, since valuations are already very high, many investors have been reluctant to increase their holdings recently. The recent pullback has slightly eased valuation pressure, allowing some investors to increase their positions.
Looking beyond technology stocks, overall, hedge funds made net purchases of US stocks last week at the fastest rate in about five months. This is clearly better than the situation in early April. At that time, data from major Wall Street banks such as Goldman Sachs and Bank of America all showed that hedge funds were selling global stocks at the fastest rate in about three months, increasing their bearish bets on the stock market.
However, hedge funds also sold quite a few stocks last week. For example, net sales of non-essential consumer goods stocks were high, and fund managers' more aggressive short selling offsets new long positions. This is similar to the trend in early April where non-essential consumer goods stocks were heavily sold. Furthermore, hedge funds dominated short selling operations on essential stocks last week.
Editor/Jeffrey