Hedge Funds, Mutual Funds Pivot From Software to Semiconductors; LRCX, AMAT, ASML See Inflows

Hedge funds and large-cap mutual funds staged a rare, coordinated rotation in the first quarter of 2026, dumping software stocks to pour capital into semiconductors, according to Goldman Sachs research published May 27. The shift pushed semiconductor weightings in hedge fund long portfolios to record highs, while software allocations sank to the lowest since 2019. Among mutual funds, software positions dropped to a 2012 trough; excluding Microsoft (MSFT), their overweight in semiconductors relative to software hit its widest mark since 2012. Hedge funds net bought Lam Research (LRCX), Applied Materials (AMAT) and ASML (ASML). Mutual funds increased stakes in Intel (INTC) and SiTime (SITM). Both groups reduced holdings in Microsoft, and mutual funds cut exposure across the rest of the "Magnificent Seven." Hedge funds, however, added to Meta (META) and Apple (AAPL). Net leverage at hedge funds rebounded to the 85th percentile of the past five years, while short interest across the S&P 500 rose to 3% of market cap, the highest since 2011. Mutual funds lifted cash to 1.4% of assets but remain near historic lows.