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Hedge funds are selling stocks from the tech sector

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Hedge funds are selling stocks from the tech sector

Thibault Camus, AP; Jeff Chiu, AP

Hedge funds that were excited about tech stocks before Nvidia’s results are now increasingly pulling back.

The pullback has led to net selling of stocks in the technology sector since Nvidia’s results.

Goldman Sachs said the Magnificent Seven’s performance will begin to lag broader economic indicators.

This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.

Nvidia’s breakthrough gains last week were followed by major outflows from the tech sector among hedge funds. They are trying to secure cash after jumping in ahead of the chip maker’s strong results.

Goldman Sachs’ prime brokerage unit reports that hedge funds invested in the technology sector at the fastest pace in seven months after a six-week buying period ahead of Nvidia’s earnings release last Wednesday.

That has triggered four straight net sales in the AI-driven technology sector since last Thursday, the day Nvidia sent investors into a frenzy, increasing its market capitalization by $267 billion (€246 billion) in a single trading session.

“Despite last week’s ‘good sentiment’ and Nvidia’s strong gains on Wednesday, the Nasdaq has traded lower in four of the last five sessions as price and activity levels have begun to show some more two-way action, which raises some tension about the sustainability of momentum from here,” Goldman’s Peter Callahan wrote in the note.

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Hedge fund investors shifted their focus to other high-quality stocks, with cash redirected from the technology sector to real estate, consumer staples and commodities, the note said.

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Callahan cautioned that as earnings season concludes, the Magnificent Seven’s performance will begin to depend on broader economic indicators such as inflation data and shifts in the Fed’s interest rate plans.

Still, market confidence in tech stocks remains high, with Nvidia alone accounting for 22 percent of the S&P’s weekly gain last week. Put-call skew, a key indicator of investor fear, declined while Nvidia retail sales rose to the 99.96th percentile of average weekly notional amounts traded over the past five years.

Read the original article in English here.

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