Source: Golden Ten Data

Hedge funds didn't reduce their risk appetite for tech stocks last week, and they bought tech stocks at the fastest rate in over a year.

According to data compiled by Goldman Sachs Group's major brokerage firms, technology stocks saw their biggest net purchase since December 2022 last week, driven by an increase in long positions and short compensation.

The buying situation of US information technology company stocks

The S&P 500 Information Technology Index (S&P 500 Information Technology Index) declined for most of April due to market concerns that the Federal Reserve would maintain high interest rates for a longer period of time, but hedge funds became net buyers of technology stocks for the fourth week in a row. Last week,$Alphabet-A (GOOGL.US)$Parent company Alphabet and$Microsoft (MSFT.US)$The company announced positive results, boosting investors' optimism about the fundamentals of the industry.

Seema Shah, chief global strategist at Principal Asset Management (Principal Asset Management), said, “The long-term potential of technology is so obvious that it is almost undisputed. However, due to such high valuations, many investors have been reluctant to increase their exposure recently. The recent pullback gave valuations a slight sigh of relief and gave investors an opportunity to invest in a strong and long-term theme.”

The S&P 500 IT Index rose 5.1% last week, ending its longest four-week decline since September last year. Alphabet's market capitalization soared to over $2 trillion, and the company assured investors of its future in the field of artificial intelligence. Microsoft announced progress in artificial intelligence in its quarterly earnings report, and the company's stock price rose accordingly.

Goldman Sachs analysts, including Vincent Lin, wrote in a report: “Earnings beat sentiment.” He added that apart from the sales guidance issued by the Meta platform company that fell short of expectations, the S&P 500 index was not significantly dragged down.

Although almost all technology sectors saw capital inflows, purchases were mainly from semiconductors and semiconductor equipment companies. According to Goldman Sachs data, the allocation of hedge funds in the sub-sector accounts for 4.4% of the total allocation of individual stocks in the US, jumping from 1.1% at the beginning of this year to the highest level in more than five years.

Overall, the net rate of hedge funds' net purchases of US stocks last week reached the highest level in about 5 months. The S&P 500 index recorded its best weekly performance since 2024, closing at around 5,100 points.

However, buying was inconsistent, as non-essential consumer goods stocks saw more net sell-offs, fund managers more aggressive short selling to offset new longs, while essential commodities stocks were mainly short selling.

Meanwhile, Marko Kolanovic, chief market strategist at J.P. Morgan Chase, said that the US stock market may repeat the late-summer slump that began in August last year. The impact of long-term high interest rates on growth poses a risk to the rise in the stock market this year. Kolanovic said, “We are still concerned that the retracement of last summer will be repeated, that the growth-policy trade-off may deviate from the 'blonde girl' narrative, while the risk of concentration reversal persists, predictions of profit acceleration this year are too steep, and position risks.” He said that the previous rise in big tech companies has overshadowed investors' concerns about interest rates.