Hedge Funds Rapidly Exit Tech and Media Stocks Ahead of Nvidia's Earnings Report
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Hedge funds exit tech, media stocks at fastest pace in six months, Goldman Sachs says
LONDON (Reuters) - Hedge funds exited U.S. tech and media stocks in the two weeks to February 21 at the fastest pace in six months, according to Goldman Sachs, just as Nvidia, one of the biggest tech firms by market capitalisation, readies to report earnings. Nvidia's profit report this week is seen as a bellwether of the burgeoning artificial intelligence (AI) industry. The AI and graphics chipmaker is the world's second most valuable company, with a 6.3% weight on the S&P 500, according to LSEG. Its shares have skyrocketed over 550% over the last two years. Speculators "aggressively" dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to a note sent to Goldman Sachs clients on Friday. A short position expects an asset price to fall while a long, or bullish, position expects it to rise. Stock hedge funds, which usually mix long and short bets in their trading strategies, last week lost money on their short wagers but made money on the parts of their portfolios holding long bets, said the note. While stock pickers finished the week flat, systematic traders returned 0.36% between February 14-20. U.S. stocks tumbled on Friday in the wake of gloomy economic reports. Some analysts and traders said that the expiration of options positions worth $2.7 trillion also added a further pressure. ASIA BULLS Hedge funds also bought developed and emerging market Asia stocks at the quickest pace in five months, Goldman Sachs said, with Asia now the only region globally where the balance of hedge fund trades is long rather than short. "China, Taiwan, and Hong Kong are by far the most net bought markets on our Prime book [year to date]," said the note. About 8% of hedge fund portfolio positions hold the stock of companies in Asian developed markets, while net allocation to Asia's emerging markets stands at 13.3%, the note said, among the highest levels for both in the past year. (Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Rachna Uppal)
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Hedge funds exit tech, media stocks at fastest pace in six months, Goldman Sachs says
LONDON, Feb 24 (Reuters) - Hedge funds exited U.S. tech and media stocks in the two weeks to February 21 at the fastest pace in six months, according to Goldman Sachs, just as Nvidia (NVDA.O), opens new tab, one of the biggest tech firms by market capitalisation, readies to report earnings. Nvidia's profit report this week is seen as a bellwether of the burgeoning artificial intelligence (AI) industry. The AI and graphics chipmaker is the world's second most valuable company, with a 6.3% weight on the S&P 500 (.SPX), opens new tab, according to LSEG. Its shares have skyrocketed over 550% over the last two years. Speculators "aggressively" dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to a note sent to Goldman Sachs clients on Friday. A short position expects an asset price to fall while a long, or bullish, position expects it to rise. Stock hedge funds, which usually mix long and short bets in their trading strategies, last week lost money on their short wagers but made money on the parts of their portfolios holding long bets, said the note. While stock pickers finished the week flat, systematic traders returned 0.36% between February 14-20. U.S. stocks tumbled on Friday in the wake of gloomy economic reports. Some analysts and traders said that the expiration of options positions worth $2.7 trillion also added a further pressure. ASIA BULLS Hedge funds also bought developed and emerging market Asia stocks at the quickest pace in five months, Goldman Sachs said, with Asia now the only region globally where the balance of hedge fund trades is long rather than short. "China, Taiwan, and Hong Kong are by far the most net bought markets on our Prime book [year to date]," said the note. About 8% of hedge fund portfolio positions hold the stock of companies in Asian developed markets, while net allocation to Asia's emerging markets stands at 13.3%, the note said, among the highest levels for both in the past year. Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Rachna Uppal Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Finance
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Goldman Sachs reports that hedge funds are swiftly exiting U.S. tech and media stocks, with a particular focus on AI-related companies, as Nvidia prepares to release its highly anticipated earnings report.
Hedge Funds Rapidly Divest from Tech and Media Stocks
In a significant shift within the financial landscape, hedge funds have been rapidly exiting U.S. technology and media stocks over the past two weeks, according to a recent report by Goldman Sachs. This exodus, occurring at the fastest pace in six months, comes at a crucial juncture as Nvidia, a titan in the artificial intelligence (AI) and graphics chip industry, prepares to release its earnings report 1.
Nvidia's Earnings: A Bellwether for AI Industry
Nvidia's upcoming profit report is widely anticipated as a key indicator of the burgeoning AI industry's health. The company has seen extraordinary growth, with its shares surging over 550% in the past two years. Currently ranked as the world's second most valuable company, Nvidia holds a substantial 6.3% weight in the S&P 500 index 2.
Aggressive Divestment in AI-Related Sectors
Goldman Sachs' client note revealed that speculators have been "aggressively" dumping both long and short positions in AI-related equipment, media, and communications equipment companies. This trend highlights a growing wariness among investors in these sectors, possibly due to concerns about overvaluation or market saturation 1.
Mixed Performance for Hedge Funds
The report also shed light on the recent performance of hedge funds. Stock hedge funds, which typically employ a mix of long and short betting strategies, experienced losses on their short positions but gains on their long bets. Interestingly, while stock pickers ended the week flat, systematic traders managed to eke out a 0.36% return between February 14-20 2.
Market Pressures and Economic Concerns
The U.S. stock market faced significant pressure on Friday, with stocks tumbling in response to gloomy economic reports. Adding to this downturn was the expiration of options positions valued at $2.7 trillion, which some analysts believe contributed to the market's volatility 1.
Shift Towards Asian Markets
In contrast to the retreat from U.S. tech stocks, hedge funds have been actively buying into developed and emerging Asian markets at the fastest rate in five months. Goldman Sachs noted that Asia is now the only region globally where hedge fund trades are predominantly long rather than short. China, Taiwan, and Hong Kong have emerged as the most net bought markets year-to-date 2.
Implications for Global Investment Strategies
This shift in investment focus underscores a potential rebalancing of global portfolios. With approximately 8% of hedge fund positions now in Asian developed markets and a 13.3% net allocation to Asia's emerging markets, these levels represent some of the highest seen in the past year. This trend suggests a growing confidence in Asian markets among institutional investors, possibly driven by perceived growth opportunities or as a hedge against uncertainties in U.S. tech sectors 1.
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