Hedge funds shift bets to double down on Big Tech amid AI boom
During the June quarter, hedge funds cut their exposure to laggards in industries like aerospace and defence, and consumer and retail, as part of a broader move back to momentum investing.
It marks a big shift from earlier this year when bets on Big Tech had soured for top money managers due to tariff-fueled volatility in financial markets, with investor concerns around rising inflation and fears of a bubble in AI triggering a sell-off in 'Magnificent Seven' stocks.
Since then, tech stocks have staged a big comeback. The S&P 500 is up 10 per cent so far this year, buoyed largely by the largest tech companies, which account for nearly a third of the combined market cap of companies on the index.
Outside technology, some hedge funds, such as Lone Pine and Discovery, also bet on UnitedHealth Group. Berkshire Hathaway and Michael Burry's Scion Asset Management also unveiled bets on the insurer, while Soros Fund Management boosted an existing position.
Shares in UnitedHealth are down 46 per cent this year, as the company faces rising costs, a US Department of Justice probe, a cyberattack and the shooting of former top executive Brian Thompson last December.
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The fund's positions were revealed in quarterly securities filings known as 13Fs. While backward-looking, these filings typically reveal what funds owned on the last day of the quarter and are one of the few ways hedge funds and other institutional investors have to declare their positions.
Below are the details of the changes in the holdings of the top hedge funds:
Bridgewater Associates
Bridgewater Associates added more shares in Nvidia, Alphabet and Microsoft in the second quarter.
The macro hedge fund founded by Ray Dalio more than doubled its bets in Nvidia. It ended June with 7.23 million shares in the chipmaker, or 154.5 per cent more than it had at the end of March. Nvidia was Bridgewater's biggest bet in a single stock, totaling US$1.14 billion.
Its holdings in Alphabet and Microsoft went up by 84.1 per cent and 111.9 per cent, respectively, amounting to US$987 million and US$853 million.
Other AI-related stocks added were Broadcom (+102.7 per cent), to 317.8 million shares, or US$317 million, and Palo Alto Networks (+117 per cent), to 313.8 million, or US$314 million.
Discovery Capital
Discovery Capital, whose founder Rob Citrone has recently been bullish on Mexico's America Movil due to its exposure to Latin America, doubled its stake in the wireless provider during the second quarter.
For the quarter ended June 30, the fund amassed another 2.65 million shares, valuing its current holding in America Movil at about US$95 million.
Citrone's hedge fund, which generated a 52 per cent windfall on its investments last year, has increased its exposure to Latin America as part of a strategy to diversify from US holdings.
During the quarter, Discovery increased its holdings in Big Tech, as it more than doubled its stake in Meta Platforms, the parent company of Facebook, while also betting on booming demand for AI as it took a new position in Nvidia-backed cloud provider CoreWeave.
The hedge fund also increased its position in UnitedHealth by 13 per cent.
Tiger Global Management
Tiger Global Management bought more stocks in some Magnificent Seven companies in the second quarter, including Amazon.com, Alphabet, Nvidia, Microsoft and Meta, its 13Fs showed.
Chase Coleman's hedge fund added roughly 4 million shares of Amazon and ended June with roughly 10 million shares, worth US$2.34 billion.
The fund also increased its bets in smaller AI-players. It added over 800,000 shares in chip-making equipment supplier Lam Research Corp, ending June with 5.26 million shares, valued at US$512 million.
Coatue Management
Many changes in Philippe Laffont's Coatue Management portfolio were also around AI-related stocks. It unveiled new positions in both Arm Holdings and Oracle, adding stakes worth roughly US$750 million and US$843 million, respectively. Both companies have boosted AI-related business initiatives.
Coatue also increased its holdings in Nvidia-backed CoreWeave, adding 3.39 million shares in the second quarter, with its stake in the company worth US$2.9 billion.
Lone Pine
Lone Pine Capital took a new position in UnitedHealth Group, buying up 1.69 million shares worth about US$528 million during the June quarter. REUTERS
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