Hedge funds pile into tech

Hedge funds have pushed their technology exposure to the highest level in five years, concentrating fresh risk in chip and artificial-intelligence trades. (goldmansachs.com) (money.usnews.com) Goldman Sachs said in January that hedge funds had already rotated into semiconductors and semiconductor equipment, where net exposure reached a five-year high, while software exposure fell to fresh five-year lows in 2025. The bank’s Prime Insights team said Magnificent Seven stocks made up about 19% of total U.S. net exposure, up from roughly 11% in early April. (goldmansachs.com) That rotation accelerated again in April. Reuters reported on April 17 that systematic hedge funds added $86 billion of stock exposure in five trading sessions, citing a Goldman note tied to bets on a ceasefire in Iran. (money.usnews.com) The chip trade has been the clearest expression of that shift. The PHLX Semiconductor Sector Index, known as SOX, closed at 9,647.21 on April 21, a new 52-week high, and a rise of about 34.4% from roughly 7,180 two weeks earlier. (google.com) SOX tracks 30 large U.S.-traded chip companies, including Nvidia, Broadcom, Taiwan Semiconductor Manufacturing, Advanced Micro Devices and Applied Materials. When hedge funds crowd into that index’s biggest names, they are effectively making one large wager on demand for artificial-intelligence hardware. (google.com) The move follows a sharp reversal from earlier this year, when Reuters reported on February 24 that hedge funds had only started creeping back into big tech after weeks of selling tied to doubts about whether heavy AI spending would justify lofty valuations. JPMorgan’s client note said funds were buying both the biggest tech stocks and companies seen as vulnerable to AI disruption. (money.usnews.com) The concentration cuts both ways. Goldman said gross leverage for its full prime-brokerage book rose for a third straight year to a record by the end of 2025, and Reuters reported on April 2 that global hedge funds then suffered their worst monthly drawdown in more than four years during March’s volatility. (goldmansachs.com) (investing.com) What changed is not just sector preference but market structure. A larger share of hedge fund risk now sits in a narrower set of AI-linked stocks, so gains can compound quickly when chip shares rally and losses can spread just as fast when that trade breaks. (goldmansachs.com) (money.usnews.com) For now, the money is still moving toward chips. The same positioning that lifted tech to a five-year high in hedge fund books has left the industry more exposed to the next swing in the AI trade. (goldmansachs.com)