In a recent prime brokerage note to clients, Goldman Sachs revealed that hedge funds sold the largest volume of US tech and media stocks since July in the week ending November 24. This move is seen as a potential indicator that the once-popular tech stocks, including the “Magnificent 7” giants like Apple, Amazon, and Nvidia, might be losing their allure.
Goldman Sachs noted that the crowding into tech stocks had reached its most intense level in 22 years, with information technology and communication companies becoming the most net sold on the prime brokerage trading desk. Hedge funds, previously long on these stocks, rapidly dropped their bets at the fastest pace in almost eight months.
Both long and short bets on software and interactive media companies were abandoned, along with long bets on semiconductor equipment sellers. This shift suggests a significant change in sentiment among big investors and advisers.
Notable figures in the financial world, including Bill Gross, Mohamed El-Erian, and Ryan Israel (Chief Investment Officer of Bill Ackman’s Pershing Square Capital Management), have expressed skepticism about a tech rebound despite a calming bond market and expectations of a pause in US rate hikes.
According to Goldman Sachs, technology, media, and telecom stocks now constitute 30.2% of total US single stock net exposure, down from a year-high in late October of 35.9%. This decrease implies a notable reduction in investor confidence in these sectors.
Vincent Mortier, CEO of Amundi, warned that while the most popular tech stocks have been “priced for perfection,” a “reckoning will come.” This statement underscores growing concerns about the sustainability of tech stock valuations.
