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Big Tech Had a Good Run. Hedge Funds Are Now Hunting for Other AI Winners

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Moomoo News Global joined discussion · May 23 08:18
Hedge fund managers are adjusting their sails in the stock market, redirecting investments from mega-cap technology firms to a diverse array of companies poised to benefit from the artificial intelligence (AI) revolution, a new report from $Goldman Sachs(GS.US)$ reveals.
An analysis of 707 hedge funds, with a mighty $2.7 trillion in equity positions, has highlighted a strategic shift in their stock holdings in 2024 Q1. These money managers have pared down their stakes in big tech stocks, broadening their array into power and infrastructure businesses that are expected to thrive amid the burgeoning AI wave.
Sectors that stand to either fuel AI adoption or reap the productivity benefits of this transformative technology have received more capital inflow this quarter.
The funds raised their positions in $Apple(AAPL.US)$ but reduced their holdings in the rest of the Magnificent Seven stocks— $Alphabet-C(GOOG.US)$ , $Amazon(AMZN.US)$ , $Microsoft(MSFT.US)$ , $Meta Platforms(META.US)$ , and $NVIDIA(NVDA.US)$ —and maintained a largely stable stake in Tesla.
Investment funds instead looked to capitalize on growth in the wider AI sector, by investing in firms that supply the broader AI universe, including chip makers $Marvell Technology(MRVL.US)$ and $Micron Technology(MU.US)$ and utilities including $The AES Corp(AES.US)$.
Additionally, investors flocked to firms that produced electrical components $Littelfuse(LFUS.US)$, distributed technology $TD Synnex(SNX.US)$, and mined the metals required for the artificial intelligence (AI) industry $Freeport-McMoRan(FCX.US)$, a copper mine.
Simultaneously, they increased their investments in businesses that stand to gain from AI technology, such as software developer $Adobe(ADBE.US)$, pharmacy operator $Walgreens Boots Alliance(WBA.US)$, and insurance provider $First American Financial(FAF.US)$.
Among the various phases of the AI trade, firms exposed to AI infrastructure investment have recently performed best and captured the most interest in our client conversations," Snider said.
The first quarter's impressive results from chip manufacturers also caused the industry's weighting in hedge funds' portfolios to soar to all-time highs of 6.5%.
Portfolios of hedge funds continued to be highly concentrated; the average money manager held 70% of the long portfolio in the top 10 positions. This was due to the fact that the most popular companies continued to make disproportionate returns, with year-to-date gains of 16% for 2024 compared to 7% for the equal-weight $S&P 500 Index(.SPX.US)$.
Source: MarketWatch, Bloomberg
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