Hedge funds have been rapidly pulling out of US tech and media stocks, exiting at their fastest rate in six months in the two weeks leading up to 21 February, according to a report by Reuters citing a report from the prime brokerage unit at Goldman Sachs.
This shift comes just as Nvidia, one of the largest tech firms by market capitalisation, prepares to release its latest earnings report.
Nvidia’s upcoming report is widely regarded as a key indicator for the booming artificial intelligence (AI) industry, with the AI and graphics chip leader currently the second most valuable company in the world, holding a 6.3% weight in the S&P 500, per LSEG data. Its stock has surged over 550% in the past two years.
Goldman Sachs noted that speculators aggressively dumped both long and short positions in AI-related equipment, media, and communications companies.
Short positions anticipate a decline in stock prices, while long positions bet on rising stock values.
Stock hedge funds, which typically balance long and short bets, lost money on their short positions but saw gains on their long bets last week, according to the Goldman Sachs client note.
While stock pickers ended the week flat, systematic traders saw returns of 0.36% between 14 and 20 February.
The market also faced added pressure on Friday, as US stocks tumbled following weak economic reports. Some analysts pointed to the expiration of $2.7tn in options contracts as another factor driving volatility.
