"When buys and sells are that closely matched, to us it signals the absence of consensus," said Shaia Hosseinzadeh, founder of OnyxPoint Global Management, a hedge fund. "Nobody disputes the quantum of (AI) spending that is happening." But he added there is disagreement about which companies ultimately will profit, which creates uncertainty.
For many funds that have held big stakes in these businesses for some time, risk factors also come into play.
"What you might be seeing is that some of these large firms might be long as much as they want to be or should be, given their risk parameters or investment policies," said Steve Sosnick, market strategist at Interactive Brokers.
"That also would explain why some companies that have reported good earnings have still seen their stocks sell off afterwards," he added. "The big holders who might normally have been buyers on good news just couldn't add more to their positions."
Institutional investors still displayed a bullish tilt toward semiconductor names as of the end of the second quarter, the 13F data showed. Of the funds that had filed with the SEC by early afternoon, 48% were net buyers and only 34.5% were net sellers.
A similarly narrow gap is evident with respect to a group of 20 major software companies, including Adobe ADBE.O and Datadog DDOG.O, with 28.2% of institutional investors revealing they were net sellers while 26.3% were net buyers.
At least one widely followed hedge fund, Tiger Global Management, disclosed that it cut its holdings in several Magnificent Seven companies, including Microsoft, Nvidia NVDA.O and Meta, and reduced its exposure to Alphabet GOOGL.O by 45.4% to 5.8 million shares. The fund also reduced its holdings in Taiwan Semiconductor TSM.N, as did SoftBank Group, although Tiger boosted its holdings of Intel INTC.O during the quarter.
That may have cost some hedge funds dearly in July, when an unwinding of technology-oriented trades put a big dent in returns. Crowded bets on technology stocks meant it was particularly difficult for hedge funds and other speculators to capture their previous profits when trying to exit their trades, JPMorgan said in a note published earlier this month and seen by Reuters.
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