Hedge Funds Mark Biggest Net Buying in Three Years

Hedge Funds Shift Strategy After Five Weeks of Selling, Focusing on Software and Semiconductor Stocks / EPA

Hedge funds have emerged as major buyers in the U.S. stock market after five consecutive weeks of net selling, marking their largest net buying activity in three years. This shift comes on the heels of stronger-than-expected corporate earnings reports from U.S. companies, which have significantly influenced market sentiment. According to Goldman Sachs Group’s latest prime brokerage report, hedge funds reversed their selling streak, making their fastest net purchases since November. This surge in buying activity, the largest since December 2021, underscores a renewed confidence among hedge fund managers, particularly in the information technology sector.

The report highlights that hedge fund purchases were heavily concentrated in software and semiconductor stocks, sectors that have shown resilience amid broader market uncertainties. This strategic pivot suggests that hedge funds are recalibrating their portfolios to capitalize on growth opportunities within the tech industry. Notably, many funds unwound their short positions while simultaneously adding to their long positions, signaling a more bullish outlook. Vincent Lin, Co-Head of Insights and Analytics at Goldman Sachs, noted, “This activity indicates that hedge funds are starting to regain constructive interest in AI-related themes, following the sell-off during the Deep Seek shock on January 27.”

Furthermore, John Flood, Partner and Head of Americas Equity Sales Trading at Goldman Sachs, emphasized the strength of micro-level data despite a challenging macroeconomic environment. He stated, “In the face of macro uncertainty, the micro data has showcased yet another robust earnings season.” This sentiment reflects the growing divergence between macroeconomic headwinds and the underlying performance of individual companies, particularly within high-growth sectors like technology.

The recent buying spree by hedge funds signals a potential shift in market dynamics, as institutional investors reallocate capital towards sectors poised for growth. The focus on software and semiconductor stocks aligns with broader trends in digital transformation and technological innovation, which continue to drive demand despite economic volatility. As hedge funds adjust their strategies, their actions are likely to have a ripple effect across global markets, influencing both investor sentiment and market performance in the coming months.