Key Points
Hedge funds are still leaning into the Magnificent 7 trade even with the broader stock market indexes recently hitting record highs. A May 24 note from the Goldman Sachs prime brokerage said that the Big Tech exposure at hedge funds reached a new high last week. “The Magnificent 7 stocks collectively now make up 20.7% of total U.S. single stock Net exposure, the highest level on our record and exceeding the previous peak level of 20% seen last summer,” the note said. “Magnificent 7” refers to a group of megacap stocks that are broadly the leaders of the tech industry — Apple , Amazon , Alphabet , Meta Platforms , Microsoft , Nvidia and Tesla . The group emerged as the engine of last year’s market rally, and hedge fund exposure to these stocks is once again more than double the level of 18 months ago. “For perspective, the group collectively made up 9.3% and 17.3% of total U.S. single stock Net exposure at the start of 2023 and the start of 2024, respectively,” the Goldman note said. The rising exposure is caused by both trading activity and higher share prices for the Big Tech stocks, particularly Nvidia . After a stronger-than-expected earnings report for the first quarter, shares of the chipmaker jumped more than 9% on May 23, the same day as the S & P 500 dipped 0.7%. NVDA 1M mountain Nvidia has outperformed the broader market in recent weeks. Net flows into the Magnificent 7 stocks have been positive in May, according to the Goldman prime brokerage data, though last week was more neutral. Bloomberg News first reported the data from Goldman Sachs. To be sure, it’s possible that even now hedge fund exposure to these stocks isn’t out of proportion to their standing in the market. The five biggest stocks in the S & P 500 — all of which are members of the Magnificient 7 — account for roughly 27% of the S & P 500, according to Strategas Research Partners. —CNBC’s Michael Bloom contributed reporting.
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