Hedge funds boost AI hardware bets to record highs, Goldman Sachs reports

Shift to semiconductor and chip stocks signals hedge funds’ deepening faith in AI-driven growth

Hedge funds' exposure to artificial intelligence-related tech hardware reached its highest in October since Goldman Sachs (GS.N) started tracking the data in 2016, the US bank said in a client note.

Hedge fund buying in semiconductor and related chip industry stocks, considered to be sensitive to economic and business cycles, suggests speculators believe rising markets have further to go, Goldman said in the note on Thursday, seen by Reuters on Friday.

Hedge fund stock buying centred on long positions, betting these equities would rise, in Asia and US companies, said Goldman.

BCA Research's Chief US Investment Strategist Doug Peta said in a research note on Tuesday that companies poised to benefit from prospective AI profits or investment are thriving while those without an AI link are lagging.

Communications services, .SPLRCL technology, .SPLRCT and utilities .SPLRCU are among the best performing S&P sub-sectors so far this year, far outperforming the benchmark S&P 500 .SPX.

But for hedge funds, tech stock fervour has shifted, Goldman Sachs said. Speculators have downsized their trades in US power companies, which are also considered part of the sector behind the servers that power artificial intelligence as well as its research and development.

The funds also moved on from a general focus in the biggest tech companies, the so-called Magnificent Seven, the note said.

The shift toward semiconductors and their related equipment began in September, Goldman Sachs said.

Buying in Asia tech companies drove overall inflows in emerging markets apart from China, where positioning has reached "fresh multi-year highs," the bank said.