Hedge funds have been adding numerous lesser-known beneficiaries from the artificial intelligence boom while dialing back exposure to megacap tech stocks after a strong rally, according to Goldman Sachs. The Wall Street investment bank analyzed the holdings of 707 hedge funds with $2.7 trillion of gross equity positions at the start of the second quarter. It looked at the smart-money cohort’s ownership of AI-related stocks in several aspects of the advanced technology: infrastructure, enabled revenues, productivity and power. Goldman found that hedge funds added to under-the-radar winners across the entire AI universe, particularly players in infrastructure, including Marvell Technology , TD Synnex , AES Corporation and Littelfuse . Walgreens Boots Alliance and First American Financial were the two names that hedge funds flocked to last quarter as their productivity has been enhanced by the use of AI. Copper miner Freeport-McMoRan and solar tracking company Nextracker, both involved in AI’s power production, also saw increased popularity among hedge funds. “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,” Ben Snider, Goldman’s equity strategist, said in a note to clients. Due to that outperformance, the proportion of semiconductor stocks in U.S. hedge funds’ long portfolios jumped to a record high of 6.5% in the first quarter, Goldman said. However, Nvidia , the chipmaker that has been the biggest winner in this AI cycle, has proven less popular with hedge funds after its eye-popping rally, the firm said. All eyes are on Nvidia’s quarterly earnings report due out postmarket Wednesday as year-over-year revenue growth is expected to top 200% for a third straight period. Nvidia shares are up more than 90% this year after soaring roughly 240% in 2023. Hedge funds also trimmed positions in other megacap stocks benefiting from the AI enthusiasm, including Microsoft , Meta Platforms and Amazon . These shares have continued their strong rallies in 2024, rising as little as 15% and as much as 33%. Apple was the exception in the so-called ” Magnificent Seven ” group — hedge funds added exposure to the Tim Cook-led iPhone maker, according to Goldman.