Hedge Funds Trim Tech Hardware Bets Ahead of Earnings

U.S. hedge funds reduced holdings in technology hardware and semiconductor stocks for a fourth straight week, according to a Goldman Sachs prime brokerage note covering the week to July 3. The Philadelphia Semiconductor Index fell 4.2% over the same period.

Goldman Sachs’ note showed funds were net sellers of individual U.S. stocks for a third consecutive week, with U.S. technology the most net-sold sector. Semiconductor and hardware names accounted for the largest declines within the sector.

Managers also trimmed positions in industrials and consumer discretionary stocks while increasing allocations to broad index funds and exchange-traded funds. The brokerage data indicated some capital was shifted from individual stock bets into wider-market instruments.

During the week, funds added stakes in commercial services, consumer staples, real estate and energy stocks, the note reported. Those additions concentrated allocations in sectors regarded as offering steadier cash flows or valuation support ahead of quarterly reports.

Traders and fund managers attributed the sector selling to elevated valuations across much of technology and uncertainty about the timing and scale of corporate spending on artificial-intelligence hardware. Profit-taking in chip shares was identified as a key driver of the semiconductor decline.

Semiconductor firms are linked to corporate investment cycles, including data-center and AI infrastructure spending. Market participants are watching whether demand for AI-related hardware will produce sustained revenue growth for chipmakers.

The repositioning by hedge funds occurred as managers prepared for the upcoming U.S. corporate earnings season, reducing concentrated stock exposures while increasing holdings in diversified or defensive areas.