Hedge funds dump tech stock at the fastest pace in a year

Hedge funds are bailing on tech stocks at the fastest clip in a year, and individual investors aren’t far behind.

Despite a blistering market rebound since President Trump’s April “Liberation Day” tariff shock, hedge funds have been unloading tech positions at levels not seen since 2024, according to a recent Goldman Sachs note.

The S&P 500, packed with seven mega-cap tech names in its top 10 holdings, has jumped 28% since the tariff-driven lows, while the Nasdaq has surged 38% in the same stretch.

But even as tech boomed, hedge funds were dumping positions across the board, including the hottest sector like semiconductors, software, and IT services.

Goldman noted that hedge funds are not shorting tech stocks to profit from a decline. Instead, they’re exiting positions outright, a signal that institutional money is dialing back their allocations rather than betting on a sudden drop.

Retail investors aren’t buying either

This retreat isn’t just a hedge fund phenomenon. Retail traders have been paring back tech holdings for months. The Schwab Trading Activity Index (STAX) logged its sixth straight month of broad selling in June.

Information technology has been the most net-sold sector for Schwab’s self-directed clients for five consecutive months. Even Nvidia (NVDA) didn’t fare well with individual investors in June, despite notching fresh all-time highs.

The question is where this money is going. The short answer: defense plays.

Individual investors have rotated into consumer discretionary names, health care, and industrials. Meanwhile, hedge funds have plowed into consumer staples for four consecutive weeks, according to Goldman.

The divergence highlights a cautious shift toward defensives as valuations in Big Tech stretch further.

A lone bull stands firm

Not everyone is backing away. Wells Fargo’s Christopher Harvey — one of Wall Street’s loudest bulls — is sticking to his call for the S&P 500 to hit 7,007 by year-end, implying another 11% upside from current levels.

Harvey told Bloomberg last week that Big Tech will lead that charge. “What we're seeing is the winners continue to win,” Harvey said in a Bloomberg Surveillance interview.

“The uber-cap companies have the higher margins, are gaining more market share. There is a real secular trend in AI that will continue.”

While skeptics warn of dot-com-style valuations, Harvey argues that today’s S&P is fundamentally stronger than it was 25 years ago. “The top companies are more growthy, more techy,” he said.

Harvey also stuck with his bullish stance during April’s tariff-driven selloff, betting correctly that Trump would soften his toughest trade threats.

Whether his optimism wins out again may hinge on whether hedge funds and retail investors stay on the sidelines or pile back into tech’s winners later in the year.