Goldman Sachs: Last week's buying intensity of technology stocks by hedge funds was the highest in over a year

Goldman Sachs' bulk brokerage business data shows that, based on the situation from last week, hedge funds considered "smart money" have not lost their risk appetite for technology stocks. This group has been buying technology stocks at the fastest pace in over a year, with the net buying of technology stocks reaching the highest since December 2022, mainly driven by an increase in long positions and short covering. This marks the fourth consecutive week of hedge funds net buying technology stocks.

In fact, the S&P 500 Information Technology Index had been weak in the time leading up to last week, with most of April seeing declines, mainly due to investors' concerns that the Federal Reserve would maintain interest rates at higher levels for a longer period.

However, with optimistic earnings from companies like Alphabet, the parent company of Google, and Microsoft, investors' optimism about the fundamentals of large technology companies has been strengthened. The recent continued buying by hedge funds appears to be wise. The S&P 500 Information Technology Index surged 5.1% last week, ending four consecutive weeks of decline, marking the longest weekly decline since September last year.

Almost all sub-industries in the technology sector saw inflows of funds, with buying mainly concentrated in semiconductors and semiconductor equipment companies. Hedge funds' allocation in the semiconductor sub-sector has increased from 1.1% at the beginning of this year to 4.4%, reaching the highest level in over five years.

NVIDIA, the most watched company in the semiconductor sector, saw its stock price surge over 6% last week, with a total weekly increase of 15%, marking the largest increase in 11 months. Although it has not yet released its financial report, many giants have promised massive investments in artificial intelligence, attracting significant funding for NVIDIA.

Chip stocks rose against the market last Thursday and accelerated on Friday, with the Philadelphia Semiconductor Index and the Semiconductor Industry ETF SOXX rising for five consecutive days, outperforming the broader market. They rose by approximately 10% and 9.3% respectively last week, erasing at least a 9% decline from the previous week. In comparison, the S&P 500 Index rose by 2.6% last week, and the Nasdaq 100 rose by nearly 4%.

Analysts at Goldman Sachs, including Vincent Lin, stated that profits outweigh emotions, and apart from Meta with outlook prospects lower than expected, other giants did not pose a major drag on the S&P 500 Index.

Analysis suggests that the long-term potential of technology companies is quite clear and almost unquestionable. However, due to already very high valuations, many investors have been reluctant to increase their positions recently. The recent pullback has slightly eased valuation pressures, allowing some investors to increase their positions.

Looking beyond technology stocks, overall, hedge funds last week bought US stocks at the fastest pace in about five months. This is a significant improvement from earlier in April when data from Wall Street giants like Goldman Sachs and Bank of America showed hedge funds selling global stocks at the fastest pace in about three months, increasing bearish bets on the stock market.

However, hedge funds also sold a significant amount of stocks last week. For example, there was a significant net selling of non-essential consumer goods stocks, as fund managers' more aggressive short selling offset new long positions, similar to the trend of heavy selling in non-essential consumer goods stocks earlier in April In addition, last week hedge funds dominated short selling operations on essential stock categories