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Hedge funds shift focus from chip stocks to software

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Hedge funds have made a notable shift in their investment strategies, selling off semiconductor stocks and purchasing shares in software companies instead, according to a report from Bloomberg citing data from Goldman Sachs’s prime brokerage desk.

For the week ending 7 June, fund managers net sold US technology stocks for the third consecutive week, with semiconductor and semiconductor equipment stocks the most net sold. Software stocks meanwhile, were the most net bought, reversing the previous week’s trend.

Despite this shift, both sectors saw gains over the five-day span. The S&P Software and Services index had its best week since January, although it has lagged behind the semiconductor index and the broader market, with a less than 6% rise in 2024. In contrast, the S&P 500 Semiconductors and Semiconductor Equipment index continues to hit all-time highs with a roughly 67% rally this year.

The recent shift in hedge fund positioning came as software stocks showed signs of slower growth from AI, while semiconductor stocks soared on strong demand and confidence in companies like Nvidia Corp.

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