Semiconductors, hedge funds lighten positions but do not abandon AI
The sector was the best-selling US sector on a net basis over the past month according to analysis by Goldman Sachs Global Banking & Markets
Key points
Hedge funds are beginning to reduce their exposure to semiconductor stocks. The trend comes at the height of a rally that has pushed the sector to new all-time highs since mid-April and responds to a portfolio management rationale, not a structural rethink on the sector. This is the analysis of Goldman Sachs Global Banking & Markets, which points out that profit-taking on chipmakers and related equipment companies, which are at the heart of artificial intelligence infrastructure, is intensifying, even as technology companies continue to grind out records andthe market prepares for mega IPOs. OpenAi is counting on reaching a trillion valuation (it is currently travelling at 852) to go public between the end of the year and 2027. A trillion-plus valuation target also for Anthropic, which is already around 950 billion and could beat OpenAi in the timing of its IPO, coming to market in October.
Technical sales, not strategic
"In the midst of this strong price rally in the sector, hedge funds have not chased the rally," notes Vincent Lin, co-head of Prime Insights and Analytics at Goldman Sachs, who adds: "On the contrary, they have reduced their exposure. It is a reflection of funds that are cashing in some of the profits by easing positions."
Flow data confirm the trend. The semiconductor and related equipment subsector was the most heavily sold US segment on a net basis in the last month, and is now in moderately negative territory in terms of net flows since the beginning of the year. This is a significant reversal from the dynamics of the past twelve months.
The graph shows the net trading flow of US institutional investors in the semiconductor sector. When the value is above zero, purchases prevail, while below zero, sales prevail. Between January and April, the sector was heavily bought, a sign of confidence in the growth of technology companies. In May, however, the flow decreased rapidly to negative.
The explanation is partly mechanical. With the strong appreciation of chip stocks since mid-April, their weight in portfolios has increased automatically, forcing some funds to sell in order to get back within their risk limits and restore allocation balances.
