According to a report by Goldman Sachs Prime Services, hedge fund clients are divesting from semiconductor and equipment stocks despite the rise in technology shares to record levels.
The semiconductors and related equipment subsector has seen the most net-selling in the U.S. over the past month and is now slightly net-sold for the year, as highlighted in a report by Goldman Sachs Global Banking and Markets.
Vincent Lin, co-head of Prime Insights and Analytics, explained that the selling is driven by risk management and profit-taking rather than a fundamental shift away from the artificial intelligence theme, which continues to be a key driver of the market rally.
Lin stated, “In the midst of the significant price rally in the group, hedge funds are not chasing. They are reducing their exposure in the sector, reflecting profit-taking and risk management.”
Despite the recent selling activity, hedge fund exposure to semiconductors remains one of the highest among U.S. subsectors since the beginning of last year. Lin also noted an increase in broader hedging activities, with short exposure to U.S. index and ETF macro products reaching a 10-year high. While gross leverage among Goldman Sachs Prime Services clients has hit record levels, net leverage remains stable.
Lin added, “This indicates a level of caution among hedge funds rather than a sense of euphoria.”
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