Goldman Sachs sees funds fleeing software for semiconductors as tech trade evolves
View original at seekingalpha.comGoldman Sachs sees funds fleeing software for semiconductors as tech trade evolves [bull market buying - green stock data trading screen] bunhill Hedge funds and mutual funds are continuing a dramatic rotation out of software stocks and deeper into semiconductors, according to a new report from Goldman Sachs strategist…
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Both hedge funds and mutual funds remain overweight industrials and underweight information technology overall
60% confidenceThe S&P 500 currently trades at about 21 times forward earnings
60% confidenceThe rotation toward semiconductors reflects investors becoming more selective about which parts of the tech ecosystem can sustain earnings growth and justify elevated valuations
60% confidenceSemiconductor exposure in hedge fund portfolios has climbed to a record high
60% confidenceMutual funds modestly raised cash levels from record lows, though allocations remain historically light
60% confidenceGoldman's year-end 2026 target for the S&P 500 stands at 7,600, implying roughly 2% upside from current levels near 7,446
60% confidenceLarge-cap mutual funds gained 7% on average in 2026 but only 30% have outperformed their benchmarks, below the historical average of 37%
60% confidenceIndustrials and consumer staples are among the sectors trading at the richest premiums relative to their own historical ranges
60% confidenceHedge funds are overweight consumer discretionary shares while mutual funds remain underweight; the opposite pattern holds in financials where mutual funds are overweight and hedge funds are underweight
60% confidenceHedge fund net leverage has climbed back to the 85th percentile relative to the last five years, with gross leverage elevated versus historical norms
60% confidenceMutual funds are carrying their largest underweight position in software excluding Microsoft since 2012
60% confidenceHedge fund software allocations have dropped to their lowest level since 2019
60% confidenceGoldman shared favorites Boeing, Mastercard, Marvell Technology, and Visa have returned 10% year to date, outperforming the equal-weight S&P 500 by roughly three percentage points
60% confidenceGoldman Sachs forecasts S&P 500 earnings per share of $309 in 2026 and $342 in 2027
60% confidenceThe Nasdaq 100 trades closer to 26 times forward earnings
60% confidenceThe 10 largest S&P 500 companies now account for 40% of S&P 500 market capitalization and 36% of index earnings
60% confidenceHedge funds have returned 7% year to date, benefiting from the rebound in momentum stocks during the second quarter
60% confidence
Data points we hold from this source
| S&P 500 Index Fund · market share | 40 percent |