Important points
Goldman Sachs says hedge funds and mutual funds are “going all-in on AI” and are moving away from software and into semiconductor stocks. “The weighting of cicadas in hedge funds’ long portfolios is at an all-time high, while the weighting of software is the lowest since 2019,” said strategists led by Ben Snyder, who looked at positioning at the beginning of the second quarter based on filings as of May 18. Among semiconductor stocks, hedge funds added Lam Research Inc., Applied Materials Inc. and ASML Holdings Inc. online, while mutual funds added Intel Inc. and Cytime Inc., according to Goldman. “‘Shared Favorites,’ which are popular holdings in both hedge fund and mutual fund portfolios, include Boeing Co., Mastercard Inc., Marvell Technology Inc., and Visa Inc. These stocks have outperformed the S&P 500 by 3 percentage points and returned 10% year-to-date,” Goldman said. “Mutual funds are increasing their cash allocations amid heightened geopolitical tensions.” “Hedge funds initially reduced their net leverage, but have since increased their net exposure to the highest level in a year,” Goldman Sachs said. U.S. stock hedge funds benefited from the market rebound in the second quarter, with year-to-date returns of 7% through May 21. However, the majority of mutual funds face challenges in keeping up with broader market gains, with only 30% outperforming their benchmarks, compared with a historical average of 37%. “Although mutual funds have raised their cash allocations to 1.4% in early April from a record low of 1.1% at the beginning of 2026, cash as a percentage of assets remains extremely low compared to historical levels,” it added. Goldman’s report analyzed the holdings of more than 1,050 hedge funds with total stock positions of $4.6 trillion and the holdings of more than 500 large active mutual funds with $3.9 trillion in stocks. assets.
