Hedge Funds Acquire US Tech Stocks as Rates Decline, According to Goldman Sachs

By Nell Mackenzie

LONDON (Reuters) – Hedge funds significantly increased their purchases of U.S. technology and media stocks last week, marking the fastest buying spree in four months. This surge was driven by expectations of a 50-basis point interest rate cut from the Federal Reserve.

Lower interest rates are anticipated to stimulate industrial spending, facilitating easier borrowing for companies and enabling consumers to purchase technology products, which could enhance the stock values of these firms.

The Fed’s first rate cut in four years contributed to a rally in U.S. stocks, with the market closing 1.15% higher last Friday as concerns about a recession eased and investors evaluated the effects of a more accommodative monetary policy.

Hedge funds nearly tripled their long positions on information technology stocks, betting on price increases compared to short positions, according to a prime brokerage note. Notably, buying activity in semiconductor and related equipment companies outpaced sales of tech hardware, such as computers, monitors, and hard drives.

Additionally, hedge funds have shifted away from short positions and increased long bets on interactive media and entertainment firms. A short position indicates an expectation that an asset’s value will decrease.

Currently, the broader technology and media sector constitutes nearly one-third of total U.S. net portfolio exposure, per the note. In contrast, consumer products faced the heaviest selling activity recorded in Goldman Sachs’ prime brokerage book.

For the first time in four weeks, sales surpassed purchases in U.S. consumer discretionary stocks, including hotels and restaurants, leading to the largest net selling in this sector within a year.

Moreover, gross leverage—representing total hedge fund borrowing and investments—reached approximately 278%, one of the highest levels recorded this year.