Key Moments
- Hedge funds carried out their largest cutback in information technology positions in a decade over the last two weeks, based on Goldman Sachs’ Prime Book data.
- De-grossing has been led by long selling and short covering for a second straight week, with risk being unwound at levels only exceeded during the early 2021 meme stock period.
- Semiconductors, technology hardware, storage and peripherals, software, and the Magnificent Seven stocks all saw notable net selling and risk reduction.
Intense De-grossing in Information Technology
Investing.com — Hedge funds have sharply scaled back their exposure to the information technology sector over the last two weeks, executing the largest de-grossing in ten years, according to Goldman Sachs’ Prime Book data.
The pullback has been characterized by a combination of selling long positions and covering short positions for the second consecutive week. A Goldman Sachs team that includes Vincent Lin stated in a report that the degree of risk unwinding is greater than at any time in the past decade, apart from the meme stock episode in early 2021.
Sector-Level Risk Reduction
Goldman Sachs reported that most technology sub-sectors saw risk scaled back last week. Among the areas with the heaviest selling activity were:
| Technology Sub-sector | Activity Noted |
|---|---|
| Semiconductors and Semiconductor Equipment | Among the highest selling volumes |
| Technology Hardware, Storage and Peripherals | Significant risk reduction via selling |
| Software | Substantial selling pressure |
These categories were highlighted as seeing the most pronounced sell flows as hedge funds scaled back their gross exposure.
Magnificent Seven Face Broad-Based Selling
The group of large-cap leaders commonly referred to as the Magnificent Seven also underwent notable de-grossing. Goldman Sachs’ data showed that these names, in aggregate, were net sold in four of the last five trading sessions.
During this stretch, long sales outpaced short covering, indicating that hedge funds were actively trimming bullish positions in these stocks rather than primarily closing out bearish bets.
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