Hedge Funds Ramp Up Tech Bets on AI Demand

Hedge funds accelerated purchases of technology stocks last week at the fastest pace in almost three months, raising allocations to global information-technology names near record highs amid optimism around artificial intelligence and higher demand for chips and software.

Goldman Sachs Prime Brokerage data showed hedge fund exposure to technology stocks is near its highest level relative to the MSCI World Index in more than five years. Some measures in the bank’s dataset, which begins in 2016, reached record highs.

The strongest buying occurred in North America and Asian emerging markets. Semiconductor and chipmaking companies accounted for the largest share of the inflows, while software companies also attracted increased allocations from speculative investors.

At the same time, hedge funds reduced exposure to communications equipment and information-technology services companies.

The Prime Brokerage data tracks relative allocations across global markets and compares hedge fund exposure to the MSCI World Index. The bank measured the uptick over the most recent week of trading in its dataset.

Goldman Sachs’ note highlighted that the changes in positioning took place despite broader macroeconomic uncertainty and geopolitical tensions related to the Iran conflict.

Advanced processors and semiconductors are required for large AI workloads, and software that supports AI deployment has drawn investor interest.

The trading activity moved allocations to firms linked to AI-related hardware and software within hedge fund portfolios.