Hedge Funds Rebuild Mega-Cap Tech Longs as Rates, Inflation Weigh

Hedge funds increased participation in several major technology stocks in September despite rising interest rates and inflation concerns, with semiconductor positioning turning more bullish, according to Data Insights, a division of Hazeltree.

The firm’s September Crowding Report showed increased numbers of funds holding long positions in Alphabet, Meta, Microsoft, Nvidia and Amazon. Long participation declined modestly in Apple and Tesla.

Short participation increased notably in Meta and Tesla and moderately in Microsoft, illustrating that growing long interest did not reflect uniformly positive sentiment.

Alphabet’s ratio of long to short fund holders returned above 1.0 after slipping below that threshold in August. Apple and Tesla remained the only Magnificent Seven stocks with more short than long holders. Tesla’s ratio fell to 0.54, its lowest reading this year.

Across the 30-stock PHLX Semiconductor Sector Index, the share of constituents exhibiting net long positioning increased to 76.7% from 73.3%.

Broadcom’s net long exposure rose to 54.1% from 34.1%, a 20-percentage-point increase that shifted its positioning from short-biased to long-biased. Its long-to-short fund count ratio climbed to 2.53 from 1.79.

“The stock spent most of the month under pressure, yet funds moved the other way, using the pullback to rebuild long exposure,” said Tim Smith, Data Insights managing director.

Applied Materials was the most crowded semiconductor long, followed by Nvidia and Broadcom. Teradyne led semiconductor short crowding, followed by ON Semiconductor and Advanced Micro Devices.

Outside technology, North American long participation increased more than 10% in names including Booking Holdings, Insulet and Evercore. European increases included Lloyds Banking Group and Glencore.

The report analyzes anonymized positioning across approximately 16,000 securities from more than 700 global funds.