Hedge funds have increased their exposure to artificial intelligence-linked hardware stocks to the highest level since 2016, according to a client note from Goldman Sachs (GS.N) seen by Reuters. The surge reflects growing conviction among major investors that the AI boom still has room to run, even after a record rally across semiconductor and data infrastructure companies.
Goldman said hedge funds sharply boosted long positions in semiconductor and chip equipment makers throughout October, signaling optimism that AI-driven demand for computing power will sustain markets despite broader macroeconomic uncertainty. The increase marks the most aggressive hedge fund allocation to the AI hardware sector in nearly a decade.
The buying spree was concentrated in U.S. and Asian chipmakers, with notable inflows to firms tied to AI data centers, cloud infrastructure, and advanced chip design. Goldman added that exposure to emerging Asian tech markets — excluding China — also hit “multi-year highs,” driven by speculative flows into South Korean and Taiwanese semiconductor stocks.
According to BCA Research, companies positioned to benefit from the next wave of AI investment continue to outperform, while those without AI exposure are falling behind. The S&P 500’s technology and communication services sectors have both far outpaced the broader index this year, underscoring investors’ concentration in tech-heavy segments.
However, Goldman noted a shift in strategy: hedge funds have been reducing positions in U.S. power utilities, which had previously drawn AI-related interest due to their role in supplying electricity to vast server farms. The “Magnificent Seven” mega-cap tech stocks — including Apple, Microsoft, and Nvidia — are no longer the central focus of speculative trades, with capital rotating into semiconductor suppliers and equipment firms since September.
The data underscores a deepening confidence that AI infrastructure, not just software, will drive the next leg of market growth — a belief that continues to reshape global investment strategies.
