LONDON – Hedge funds dramatically reduced their holdings in tech stocks last week, marking the fastest sell-off in six months and the highest level of tech stock selling in five years, according to Goldman Sachs. This shift comes as global markets tumbled due to rising concerns over the impending U.S. President Donald Trump’s April 2 tariff deadline. The looming threat of tariffs, coupled with the potential for retaliation from U.S. trade partners and cuts to government spending under Trump, has sparked growing fears of a possible U.S. recession in the coming months.
Hedge Fund Moves: Selling Tech Stocks
Goldman Sachs revealed that hedge funds quickly ditched their long positions in tech stocks and also exited bets against these stocks at a fast pace. The move reflects the broader uncertainty in markets as tariff concerns mount. According to Goldman’s note, info-tech stocks—including the renowned Magnificent-7 tech stocks—were the “most net sold” on the bank’s Prime book, which tracks hedge fund activities via its prime brokerage desk.
This sentiment underscores the tech sector’s vulnerability to tariff impacts, particularly among companies with heavy exposure to AI-related tech hardware, which has been a focal point of the hedge fund sell-off. Goldman Sachs highlighted that hedge fund exposure to tech stocks is now at its lowest level in five years.
Tariffs and Their Impact on Tech Stocks
One major factor driving this shift is the anticipated copper tariffs set to take effect on April 2. Analysts from Edmond de Rothschild linked the downward trajectory of tech stocks to these tariffs, with fears that the imposed duties could significantly affect supply chains and technology manufacturers.
The selling pressure on tech stocks was especially evident among major companies like Nvidia (NVDA.O), Advanced Micro Devices (AMD.O), and Tesla (TSLA.O), which were among the most shorted stocks last week, according to a Morgan Stanley report. Short positions—bets that the stock price will decline—have become increasingly popular, particularly in the tech sector.
Market Sentiment and Retail Influence
Interestingly, Goldman Sachs reported that the majority of the selling (around 75%) last week came from U.S. tech stocks. The focus remained on those companies most directly involved in the production of hardware for artificial intelligence (AI).
In addition to the concerns over tariffs, JPMorgan noted that strong retail buying might have also influenced hedge fund activity. Retail investors are often seen as having a different risk profile and may be more likely to hold onto positions in anticipation of longer-term growth, contrasting with the more reactive strategies of hedge funds. JPMorgan’s report suggests that this shift in sentiment could signal that hedge funds were preparing for the worst in response to the tariff news, and possibly adapting their positions in key stocks to shield against further volatility.
A Record Low in Tech Exposure
Hedge funds had built up positions in tech stocks earlier in March, but this quickly reversed as they sold off the sector in the face of growing concerns about the potential effects of tariffs. Goldman Sachs highlighted that hedge fund exposure to the tech sector now stands at a five-year low, indicating a cautious stance amid heightened uncertainty.
Conclusion
The tech sector’s vulnerability to trade tariffs is causing major hedge funds to reevaluate their positions, leading to a significant sell-off in stocks associated with AI hardware. The situation highlights the growing tension between trade policy and stock market performance. While hedge funds adjust their portfolios, the tech industry faces increased scrutiny and potential challenges ahead as tariff deadlines draw closer.
As markets remain volatile, investors will likely continue to monitor developments related to tariffs and trade agreements, with particular focus on the potential impact on tech stocks. Whether these changes are temporary or the beginning of a longer-term trend remains to be seen.
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