According to the analysis of the top investment bank Goldman Sachs, hedge funds are "heavily" selling technology stocks during the month when Nvidia briefly became the "world's number one stock."

According to Goldman Sachs brokerage data, net selling of the US technology industry this month is expected to reach the largest scale since 2017. Semiconductor and semiconductor equipment stocks are the most sold by hedge funds, followed by software and internet stocks.

The contrast between the reduction of hedge fund exposure and the record fund inflows of technology funds last week is reflected in the market sentiment. The Nasdaq 100 index, which is dominated by technology stocks, hit a new high on June 18, but has since fallen significantly in the following three trading days.

Nvidia, which has a similar trend as the Nasdaq 100 index, has lost $430 billion in market capitalization in three days. It can be said that June is a turbulent month for large-cap technology stocks, and the major indices are also affected by these companies. The technology stock weighting of the S&P 500 index reached 33% last week, a new high in about 24 years.

"If Nvidia falls 3.5%, it will be difficult for the S&P 500 index and the Nasdaq Composite Index to maintain their gains. However, the overall loss is not significant, and the Dow Jones Industrial Average is still rising," commented Louis Navellier, founder of Navellier & Associates.

In addition, the "momentum factor investment strategy" that has driven the prices of stocks such as Nvidia to repeatedly set new highs is also declining. Goldman Sachs data shows that the momentum exposure of hedge funds may record the first decline in nearly six months.

Data also shows that both the "long concentration" and "long crowding" have both significantly declined to the lowest level this year, indicating that fund managers are more concerned about the potential retreat of these factors after obtaining strong returns.

Not only have technology stocks been hit, but hedge funds are now more inclined to be defensive than usual, and their total leverage ratio has been declining. North America and Europe are the regions with the most net selling in nominal terms in June.

Goldman Sachs wrote in the report that from the beginning of the year until last week, the hedge fund's investment portfolio has been increasing risk exposure every week, and "recent trading volumes indicate that some risk exposure has decreased."

Previously, Michael Wilson, chief US equity strategist at Morgan Stanley, mentioned the three major risks that could cause a US stock market correction. He pointed out that the possibility of slowing growth is the greatest, while inflation rebounding and liquidity conditions deteriorating are the other two threats.

According to Wilson, in the case of slowing growth, high-quality large-cap stocks and defensive stocks may perform better.