US hedge funds continue to reduce exposure to technology hardware stocks for the fourth consecutive week, according to a Goldman Sachs client note reviewed by Reuters, reflecting weakness in global semiconductor shares and positioning ahead of the upcoming corporate earnings season.
Information technology stocks, including semiconductor and hardware companies, emerged as the most net-sold sector among US equities during the week ended July 3. The selling comes after technology shares, particularly chipmakers, drove much of the broader market's gains this year, but have recently come under pressure.
Investor sentiment has been weighed down by profit-taking and growing concerns over the massive investments being made in artificial intelligence, with markets closely watching when companies are likely to generate meaningful returns from those expenditures.
The semiconductor-heavy SOX index fell 4.2% during the week to July 3, highlighting the recent weakness in chip stocks ahead of earnings reports from several major technology companies.
Reuters reported that hedge funds were net sellers of stocks for a third consecutive week, with selling concentrated primarily in individual US equities rather than broader market products.
Beyond technology, hedge funds also reduced exposure to industrial and consumer discretionary stocks during the period, according to the Goldman Sachs note.
At the same time, investors increased allocations to index funds and exchange-traded funds (ETFs), instruments that generally move in line with the broader equity market.
Goldman Sachs' note, as reported by Reuters, also showed hedge funds were net buyers of commercial services, consumer staples, real estate and energy stocks during the week.
Hedge funds may sell stocks either to unwind bullish positions or to establish or increase bearish bets, depending on their broader investment strategies.
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