Although last week's Meta financial report and phone conference performance once raised doubts about the prospects of artificial intelligence investment in the market, the strong financial reports of Google and Microsoft still restored confidence on Wall Street.
Data shows that hedge funds known as "smart money" increased their holdings in US technology stocks at the fastest pace in over a year last week, particularly accelerating their influx into the semiconductor industry.
Hedge funds surged into technology stocks last week
According to data compiled by major brokerage firms under Goldman Sachs Group, US technology stocks saw their largest net buying since December 2022 last week, driven by an increase in long positions and short covering.
Despite the potential threat of the Federal Reserve delaying interest rate cuts, the S&P 500 index experienced a correction for most of April, but hedge funds have become net buyers of US technology stocks for the fourth consecutive week. Especially after Google's parent company Alphabet Inc. and Microsoft released strong financial reports last Thursday, investors' optimism about the fundamentals of the technology industry has further increased.
Seema Shah, Chief Global Strategist at Xinan Asset Management, said, "The long-term potential of technology stocks is very clear and almost indisputable. However, due to the already high valuations of technology stocks, many investors have been reluctant to increase their exposure recently, and the recent pullback has just slightly cooled the valuations of technology stocks, creating an opportunity for investors to increase their positions."
The S&P 500 Information Technology Index had already fallen for four consecutive weeks, setting a record for the longest decline since September last year. And the index rose 5.1% last week, finally announcing the temporary end of this downward trend. Meanwhile, after Alphabet and Microsoft released strong financial reports and demonstrated their prospects in the field of artificial intelligence, both companies saw their stock prices rise, especially with Alphabet's market value soaring to over $2 trillion.
Buying is concentrated in the semiconductor industry
Goldman Sachs analyst Vincent Lin and others wrote in their report that superior performance has dispelled people's concerns. He added that except for the lower than expected sales guidance released by Meta platform company, the S&P 500 index has not been dragged down by other giants.
Although almost all technology sectors have seen capital inflows, buying has mainly focused on semiconductor and semiconductor equipment companies.
According to Goldman Sachs data, the average proportion of hedge funds allocated to the semiconductor industry in their US stock portfolio has increased from 1.1% at the beginning of the year to 4.4%, jumping to the highest level in over five years.
Overall, hedge funds saw their net buying rate of US stocks reach its highest level in about five months last week. This also pushed the S&P 500 index to its best weekly performance since 2024, closing near 5100 points.
However, hedge funds have seen more net selling in non essential consumer stocks, while short selling is the main trend in essential stocks.