Hedge Funds Take Profits as Chip Stock Rally Loses Momentum
Hedge funds have been reducing exposure to U.S. semiconductor stocks following the sector’s powerful rally, choosing to lock in gains while maintaining confidence in the long-term potential of artificial intelligence investments.
According to analysis from Goldman Sachs, cited by Bloomberg, the recent selling activity appears to reflect portfolio adjustments rather than a broader bearish shift toward AI-related assets.
Semiconductor Stocks Become the Most Sold U.S. Sector Among Hedge Funds
Data from Goldman Sachs’ prime brokerage division showed that semiconductor and semiconductor equipment companies were the most heavily net-sold U.S. subsector during the past month.
The reduction was mainly driven by investors trimming existing long positions instead of opening new short positions against the industry.
As a result, semiconductor stocks have moved into a net-sold position for the year, highlighting increased profit-taking after months of strong gains.
AI Chip Stocks Have Dramatically Outperformed the Broader Market
The selling follows an exceptional surge across semiconductor shares.
Goldman Sachs’ AI semiconductor basket has outperformed the S&P 500 by more than 50% this year, underscoring investor enthusiasm surrounding artificial intelligence infrastructure and chip demand.
Meanwhile, the broader S&P 500 gained more than 18% from late March before experiencing a recent three-day decline.
The strong performance of AI-linked stocks has fueled concerns that valuations may have risen too quickly, encouraging institutional investors to secure profits.
South Korea’s Kospi Highlights Strong Global AI Investment Demand
The Kospi index in South Korea, often viewed as a key indicator of global demand for AI infrastructure and semiconductor investments, briefly climbed above 8,000 points for the first time in mid-May.
The benchmark had risen more than 80% year-to-date before later retreating sharply.
The move reflected the global wave of optimism surrounding AI technologies, data centers, and semiconductor manufacturing.
Goldman Sachs Says Hedge Funds Remain Bullish on Artificial Intelligence
Despite recent selling in semiconductor shares, Goldman Sachs indicated that hedge funds remain heavily invested in artificial intelligence themes.
Exposure to U.S. AI stocks tracked within Goldman’s technology, media, and telecommunications basket remains close to record highs.
The bank suggested recent trades represent portfolio rebalancing rather than weakening conviction in AI growth opportunities.
Hedge Funds Increase Market Hedges as Risk Concerns Persist
At the same time, hedge funds have expanded short positions in broader equity indexes and exchange-traded funds (ETFs) to protect portfolios against wider market risks.
These hedging positions have reportedly reached their highest levels in more than a decade, signaling increased caution despite optimism toward AI.
Goldman Sachs also noted that gross leverage among hedge funds climbed to a new five-year high this month, while net leverage remained relatively stable.
According to analysts, this pattern differs from the type of excessive market enthusiasm often associated with retail investor euphoria.
The combination of elevated leverage and defensive hedging suggests institutional investors remain optimistic on AI while preparing for broader market volatility.
