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May 27, 2024
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Hedge Funds Are Ditching Mega-Cap Big Tech Stocks, Goldman Sachs Says


  • Hedge funds have started to dump mega-cap tech stocks, according to Goldman Sachs.
  • The “Magnificent Seven” ruled the market last year, racking up huge gains that lifted the S&P 500.
  • But they’ve had a rough start to 2024, with investors fretting the group might be overvalued.

Hedge funds are turning away from the mega-cap tech stocks that ruled the market last year, according to Goldman Sachs.

Managers kicked off 2024 by dumping shares in US information technology companies for the third week in a row, the bank said in a note to clients seen by Business Insider, with strategists attributing the sell-off to funds seeking “reduced exposure to mega-cap tech”.

The funds’ overall exposure to info tech stocks is now approaching a five-year low, Goldman Sachs added.

The so-called “Magnificent Seven” group – consisting of Apple, Microsoft, Google owner Alphabet, Amazon, Nvidia, Facebook parent Meta Platforms, and Tesla – rode the AI investing craze to massive gains last year, powering the S&P 500 higher. Nvidia and Meta were the benchmark index’s two best performers, while Tesla’s gains of over 100% earned it a spot in the top 10.

But they’ve had a rough start to 2024, with investors fretting the mega-caps’ quarterly earnings won’t be able to keep up with their lofty valuations. Apple has already shed $100 billion worth of market capitalization, per data from Refinitiv, with iPhone sales in China slumping, while Tesla shares have tumbled 3% since the company was overtaken by BYD as the world’s top EV seller.

Hedge funds also spent the post-Christmas period dumping consumer discretionary stocks, according to Goldman Sachs, with the sector experiencing “the largest net selling since September”.

The flagship funds of Ken Griffin’s Citadel, Steve Cohen’s Point72, and Izzy Englander’s Millennium each racked up double-digit gains in 2023 – although none of those big names were able to match the S&P 500’s 24% surge.

Read more: Hedge fund annual returns are rolling in — and Citadel’s Ken Griffin is on top again. Here’s how Millennium, Point72 and others finished 2023.



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