Written by Nell McKenzie and Carolina Mandl
LONDON/NEW YORK (Reuters) – Global hedge funds sold tech stocks at the fastest pace in nearly eight months in the week ending Feb. 23, according to Goldman Sachs, with tech stocks soaring on Nvidia's latest results. Stocks that piled up bets on the sector just as it accelerated.
Hedge funds' selling of tech stocks ranked among the highest in five years, according to a Goldman Sachs report released on Friday and confirmed by Reuters on Monday.
Morgan Stanley said in a separate note that the most oversold sector last week was tech.
Stock indexes, including the tech-heavy Nasdaq, rose to record highs on optimism about artificial intelligence. Chipmaker Nvidia increased its stock market value by $277 billion on Thursday, the biggest single-day gain on Wall Street ever, after the company's quarterly report beat expectations.
But in a sign that the tide is changing, Goldman Sachs says the number of hedge funds with short bets on tech stocks falling is now twice as many as those with long positions. It is said that there is.
Hedge funds placed short-term bets on stocks of tech companies across all sectors. The bank said it exited long positions and added short punts in manufacturing and service equipment for the semiconductor industry, high-tech hardware, storage and IT services.
Goldman Sachs said speculators added short bets on software companies, while Morgan Stanley said hedge funds were betting on semiconductor and high-tech hardware companies.
However, a separate note from Goldman Sachs said traders remained reluctant to completely exit positive positions in the tech space. This marks the highest value of Nvidia's call options in two years.
These are derivative bets that put traders long only if the stock price exceeds a certain price threshold, and are a way to express a positive position in the stock, but only if the stock price rises to a certain point.
Goldman Sachs' first note showed speculators were generally shorting U.S. stocks, the biggest net short interest in the region's stock market in five weeks.
Sustained price increases by U.S. service sector companies have highlighted the tenacity of inflation, dampening expectations for rate cuts in 2024 and dampening hopes for a soft landing.
Traders ditched tech, health care and industrial stocks and replaced them with companies that make products people buy every day, according to Goldman Sachs, the largest consumer staples market in 10 weeks. He said he bought the stock.
Hedge funds sold stocks Monday through Wednesday, but changed their minds after Thursday's rally in tech stocks sparked by Nvidia, according to Morgan Stanley. I bought back all the stocks I bought.
(Reporting by Nell McKenzie in London and Carolina Mandl in New York; Editing by Darla Ranasinghe, Andrew Heavens and Leslie Adler)
