Goldman research shows hedge funds reduced exposure to mega-cap tech equities

The strong performance of the well-known stocks has allowed the average US long/short equity hedge fund to return 8% since the beginning of 2024.

The Magnificent 7 group, which has returned 16% year to date, holds six of the top places on the bank's list of the most popular long holdings, except Tesla.

Hedge funds, meanwhile, have decreased their exposure to mega-cap tech equities in order to pursue alternative alpha possibilities, suggesting a broader equity market.

Goldman analysts stated in a report on Tuesday that "AAPL was the exception and screened into our Rising Stars list of the stocks with the largest increases in hedge fund popularity."

They said, "Funds continued to buy cyclicals, including Financials, lifting them to the largest tilt since 2012."

S&P Global, Discover Financial Services, and Bank of New York Mellon have all joined Goldman Sachs' list of equities dubbed "Rising Stars."

Hedge funds have been boosting their investments in broader AI beneficiaries, especially those in the Phase 2 infrastructure—that is, firms who are constructing the groundwork required to enable AI development beyond the initial phase—while simultaneously reducing their exposure to mega-caps.

More specifically, according to Goldman, hedge funds have been increasingly interested in equities like Marvell Technology, Synnex Corporation, AES Corporation, and Littelfuse.

MRVL was singled out by Goldman as the best Rising Star investment among hedge funds. Furthermore, hedge funds have added Micron, a manufacturer of memory chips with an emphasis on artificial intelligence, to their list of preferred long holdings.

(Sources: investing.com, reuters.com)