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Magnificent Seven Stakes Cut as Hedge Funds Invest in Broader Ai Boom

May 22, 2024
minute read

In the first quarter of 2024, hedge funds began reducing their investments in the "Magnificent Seven" tech giants and instead shifted focus towards a broader range of artificial intelligence (AI) stocks, according to a new analysis by Goldman Sachs.

The analysis, which reviewed 707 hedge funds managing a total of $2.7 trillion in equity positions, revealed that money managers decreased their stakes in mega-cap stocks. Instead, they increased investments in power and infrastructure companies poised to benefit from the anticipated AI boom.

While hedge funds raised their holdings in Apple (AAPL), they reduced their investments in other Magnificent Seven stocks, including Alphabet (GOOG), Amazon (AMZN), Microsoft (MSFT), Meta (META), and Nvidia (NVDA), while maintaining their positions in Tesla (TSLA).

In a strategic move to capitalize on the broader AI sector's growth, hedge funds directed their investments towards companies that supply to the AI industry. This included chip makers such as Marvell Technology (MRVL) and Micron Technology (MU), and utilities like AES Corp (AES).

Furthermore, money managers increased their stakes in companies producing electrical components, including Littelfuse (LFUS), technology distribution firms like TD Synnex (SNX), and metal miners crucial for AI technology, such as copper miner Freeport-McMoRan (FCX).

They also boosted their investments in companies directly benefiting from AI technologies, including software maker Adobe (ADBE), pharmacy owner Walgreens Boots Alliance (WBA), insurance firm First American Financial Corporation (FAF), and tech giant Apple.

Hedge funds' investment in utilities and financial companies marked the largest shift towards these sectors in the past decade. Power generators like Vistra Corp (VST) and NextEra Energy (NEE) made it onto Goldman Sachs’ VIP list of the 50 most popular stocks.

This pivot towards utilities followed a strong performance by the sector, which secured third place as the highest-returning industry in 2024 with gains of 15%. This was behind information technology companies, which posted gains of 16%, and communication services firms, which led with a 21% increase.

Despite reducing their stakes, the Magnificent Seven stocks, excluding Tesla, remained the top holdings among hedge funds, thanks to the ongoing rally that boosted their weightings in portfolios.

The impressive performance of chip makers in the first quarter further increased the semiconductor industry's weight in hedge funds' portfolios to a record high of 6.5%.

Hedge funds' portfolios continued to be heavily concentrated, with the average manager holding 70% of their long portfolio in their top 10 positions. These popular stocks saw significant gains of 16% year-to-date in 2025, compared to a 7% rise for the equal-weight S&P 500 (SPX).

In summary, hedge funds have been diversifying their investments by cutting back on the Magnificent Seven and increasing stakes in companies across the AI spectrum. This strategic shift reflects a broader anticipation of growth and opportunities within the AI sector, extending beyond just the major tech giants to include infrastructure, utilities, and key suppliers within the AI industry. This diversification approach aims to capture the varied and expansive potential of the AI revolution, indicating a forward-looking investment strategy among hedge funds.

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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