Hedge funds 'doubling down' on AI are fleeing software stocks: Goldman

Hedge funds and mutual funds are going "all In on AI," moving toward semiconductor stocks and away from software, according to Goldman Sachs. "The weight of Semis in the hedge fund long portfolio is the highest on record while the weight of Software is the lowest since 2019," according to strategists led by Ben Snider, who looked at positioning at the start of the second quarter using filings as of May 18. Among semiconductor stocks, hedge funds added to Lam Research Corp, Applied Materials Inc, and ASML Holding on net, while mutual funds added to Intel Corp and SiTime Corp, according to Goldman. "Shared favorites" that registered as popular holdings in both hedge fund and mutual fund portfolios included Boeing Co., Mastercard Inc., Marvell Technology Inc. and Visa Inc.," Goldman said. It added that these stocks have outperformed the S & P 500 by 3 percentage points, returning 10% year-to-date. "Mutual funds have increased cash allocations amid the rise in geopolitical tensions. Hedge funds cut net leverage initially but have since lifted net exposure to a one-year high," Goldman Sachs said. U.S. equity hedge funds have benefited from the market rebound in the second quarter and returned 7% year-to-date through May 21, Goldman noted. However, the majority of mutual funds have faced challenges to keep up with the gains in the broader market — only 30% are exceeding benchmarks compared with an average 37% historically, the firm said. "Although mutual funds lifted cash allocations from a record low of 1.1% at the start of 2026 to 1.4% at the start of April, cash balances as a share of assets still remain extremely low relative to history," it added. Goldman's report analyzed the holdings of more than 1,050 hedge funds with $4.6 trillion of gross equity positions, as well as over 500 large-cap active mutual funds that have $3.9 trillion in equity assets.