Hedge funds are dumping tech stocks despite their recent rally, says Goldman Sachs

By Isabel Wang

Hedge funds' net selling of technology stocks in June is on track to be the largest on record, per analysts

Megacap technology companies are again driving the stock-market rally in June, yet hedge funds are dumping them in a reverse of their buying trend earlier this year, according to analysts at Goldman Sachs.

Hedge funds have "aggressively" net sold stocks in the technology, media and telecom sectors in the past month, with the amount of monthly net selling on track to be the largest on record going back in data since 2017, a team of Goldman analysts led by Vincent Lin, co-head of prime insights and analytics of global securities lending, said in a note earlier this week.

Semiconductor and semiconductor-equipment stocks were the subsectors getting dumped the most by hedge funds in June, followed by stocks in the software and internet sectors, the Goldman data showed.

Meanwhile, the hedge funds' exposure to "momentum stocks" is on pace to decrease for the first time in six months, the Goldman analysts said, adding that the funds' exposures to "long concentration" and "long crowdedness" have both seen notable declines, and they are at their lowest levels so far in 2024. That suggests "long-short fund managers have become more mindful of a potential drawdown in those factors after strong returns year to date," Lin and his team said.

See: Is an AI stock bubble looming? That's the $167 billion question.

Recent volatility in Nvidia Corp.'s (NVDA) stock has sparked concerns on Wall Street that the seemingly unstoppable astronomical surge in the AI darling's share price could run out of steam.

The undisputed leader of the AI frenzy last week closed at an all-time high and briefly surpassed Microsoft Corp. (MSFT) and Apple Inc. (AAPL) to become the world's most valuable public company before swiftly giving that title back, but its shares have tumbled over 2% so far this week, while still on pace to record a 13.1% monthly advance, according to FactSet data.

See: PCE inflation report likely to show little or no price increases in past month

U.S. stocks finished modestly higher on Thursday afternoon ahead of the release of the May PCE inflation report on Friday morning. The Nasdaq Composite COMP was up 0.3%, while the Dow Jones Industrial Average DJIA and the S&P 500 SPX each rose less than 0.1%, according to FactSet data.

-Isabel Wang

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06-27-24 1644ET

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