Hedge fund clients are selling off their semiconductor and equipment stocks as technology stocks soar to record highs, according to Goldman Sachs Prime Services.
The semiconductors and related equipment subsector was the top net selling subsector in the U.S. last month and is now at modest net sales on a year-over-year basis, according to Goldman Sachs Global Banking and Markets reports.
Vincent Lin, co-head of Prime Insights and Analytics, says the move is a reflection of risk management and profit-taking rather than a fundamental shift away from the artificial intelligence theme, which remains central to the broader market rally.
According to Vincent Lin:
“In the midst of this substantial group price rally, hedge funds haven’t gone hunting. They’ve sold their positions in the sector. It’s a reflection of hedge funds taking profits and taking some chips off the table.”
Despite recent selling, hedge funds’ cumulative exposure to semiconductors remains among the highest of any U.S. subsector since the start of last year. Lin says broader hedging is also underway, with short exposure to US indexes and ETF macro products rising to a decade’s highest. Gross leverage among Goldman Sachs Prime Services clients has reached record levels, but net leverage remains flat.
According to Lin,
“It indicates some reluctance among hedge funds. It does not indicate euphoria.”
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