What percentage of the S&P 500 is FAANG?
Trading and Investing
Goldman Sachs reported in a recent client note that hedge funds sold off a significant volume of U.S. tech and media stocks in the week leading up to November 24, marking the largest such sell-off since July. This trend suggests a waning interest in these previously popular stocks.
The investment bank had noted an unprecedented crowding in tech stocks, especially among the top-tier companies often referred to as the “Magnificent 7,” which includes industry giants such as Apple (AAPL.O), Amazon (AMZN.O), and Nvidia (NVDA.O). According to Goldman Sachs, this concentration had reached its highest level in 22 years. However, by the week’s end, the technology and communication sectors had become the most net sold categories on Goldman’s prime brokerage desk, which primarily services hedge funds.
This shift indicates that hedge funds, which had previously held long positions in these stocks, were rapidly backing away, marking the quickest retreat in nearly eight months. The sell-off was not limited to specific types of bets; traders were moving away from both long and short positions in software and interactive media companies. They were also notably exiting long positions in semiconductor equipment companies.
Notably, prominent investors and financial advisors, including Bill Gross, Mohamed El-Erian, and Ryan Israel of Pershing Square Capital Management, shared insights with Reuters earlier this month. They expressed skepticism that a stabilization in bond markets and a potential pause in U.S. interest rate hikes would suffice to buoy tech stocks and broader asset prices. According to Goldman Sachs, the share of technology, media, and telecom stocks in total U.S. single stock net exposure has dropped to 30.2%, down from a peak of 35.9% in late October.
Vincent Mortier, chief investment officer at Amundi, commented last week that while the most popular tech stocks have become “priced for perfection,” a time of adjustment or “reckoning” might be approaching. This sentiment underscores a broader reassessment of value and risk in the tech sector amid evolving market conditions.
