The current wave of artificial intelligence (AI) has driven a group of technology stocks to soar, but at the same time, the market is becoming increasingly concerned that some individual stocks may underperform in the current wave. According to Goldman Sachs data, as of the end of May, chip stocks were still the darling of hedge funds, while software stocks faced the fate of being sold off.
However, in just one short week, the attitude of hedge funds seems to have changed 180& deg; Big turn: They have started selling semiconductor stocks that benefited from the prosperity of artificial intelligence and are now rushing to buy software stocks.
According to data from Goldman Sachs Group's prime brokerage division, fund managers have been net sellers of US technology stocks for the third consecutive week. Among them, semiconductor and semiconductor equipment stocks had the highest nominal net sales in the week ending June 7th, while software stocks had the highest net purchases. This is completely opposite to the trading strategy of the previous week.
The S&P Software and Services index recorded its best weekly performance since January. The index rose by less than 6% in 2024, lagging behind the semiconductor sector and the overall market. The S&P 500 Semiconductor and Semiconductor Equipment Index continues to hit a historic high, rising by approximately 67% so far this year.
Richard Ross, Senior Managing Director and Head of Technical Analysis at Evercore ISI, said, "Currently, the popularity and position in the software market cannot be worse. I believe that any funds flowing into the industry are a positive opportunity to buy software stocks, and we support this, but it does not mean it is an opportunity to reduce holdings in semiconductor stocks."
The future is yet to be observed
As for whether last week's position adjustment was a tactical transaction or a change, it remains to be seen.
At the time of this divergence, software stocks generally show signs of slowing growth brought about by artificial intelligence. Investors have turned to semiconductor stocks, driven by confidence that Nvidia and other chip stocks will continue to rise, semiconductor stocks have surged due to strong demand.
Goldman Sachs analyst Vincent Lin believes that "the industry's stance may change." The bank stated that the healthy rebound in its software business is driven by the improved profits of computer security technology company CrowdStrike Holdings Inc. and US software company Guidewire Software Inc., as well as the dynamics of oversold positions.
In Ross and others' view, there is still room for further growth in semiconductor stocks. Ross believes that semiconductor stocks will explode again after three months of consolidation, and they are in the best position for further growth, both tactically and structurally.
Fairlead Strategies Senior Analyst Will Tamplin said, "In the short and long term, semiconductor stocks still have strong upward momentum relative to software stocks, so there is currently not enough evidence to suggest that the leadership position of the technology sector is changing."