Hedge funds exited U.S. tech and media stocks in the two weeks to Feb. 21 at the fastest pace in six months, according to Goldman Sachs, just as Nvidia Corp. (NVDA-Q), one of the biggest tech firms by market capitalization, readies to report earnings.
Nvidia’s profit report this week is seen as a bellwether of the burgeoning artificial-intelligence (AI) industry. The AI and graphics chipmaker is the world’s second-most valuable company, with a 6.3-per-cent weight on the S&P 500, according to LSEG. Its shares have skyrocketed over 550 per cent over the last two years.
Speculators “aggressively” dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to a note sent to Goldman Sachs clients on Friday.
A short position expects an asset price to fall while a long, or bullish, position expects it to rise.
Stock hedge funds, which usually mix long and short bets in their trading strategies, last week lost money on their short wagers but made money on the parts of their portfolios holding long bets, said the note.
While stock pickers finished the week flat, systematic traders returned 0.36 per cent between Feb. 14-20.
U.S. stocks tumbled on Friday in the wake of gloomy economic reports. Some analysts and traders said that the expiration of options positions worth US$2.7-trillion also added a further pressure.
Hedge funds also bought developed and emerging market Asia stocks at the quickest pace in five months, Goldman Sachs said, with Asia now the only region globally where the balance of hedge fund trades is long rather than short.
“China, Taiwan, and Hong Kong are by far the most net bought markets on our Prime book [year to date],” the note said.
About 8 per cent of hedge fund portfolio positions hold the stock of companies in Asian developed markets, while net allocation to Asia’s emerging markets stands at 13.3 per cent, the note said, among the highest levels for both in the past year.
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