Tech Giants Losing Favor with Big Investors: A Warning for the Bull Market?

The once-revered 'Magnificent Seven' tech stocks might be losing their luster among big-time investors, potentially foreshadowing trouble for the bull market that has heavily depended on these tech titans. According to Goldman Sachs' examination of recent quarter-end securities filings, both hedge funds and mutual funds have reduced their exposure to information technology stocks, reaching their lowest sector weightings in the past ten years. This trend has continued into the third quarter, with hedge funds discarding tech stocks for the fourth consecutive week, increasing sales on both the long and short sides. Bank of America's client flows also reflect this movement, with technology experiencing the most significant outflows last week among the 11 S & P 500 sectors.

This selling spree might be the reason why many of the stock market's largest companies have yet to recover their recent peaks, even as the Dow Jones Industrial Average reached a new all-time high on Monday. Notable examples include Apple, Amazon, and Google parent Alphabet, which remain more than 10% below their respective 52-week highs. Nvidia, another tech heavyweight, is trading approximately 8% below its recent high. Much hinges on Nvidia's quarterly earnings, set to be released Wednesday after the market closes. All eyes are on the leading beneficiary of the artificial intelligence boom to determine if it still has room for growth, especially after surpassing record after record in 2024. However, Goldman's Scott Rubner, a managing director, cautions that 'The bar for Nvidia this earnings season is significantly lower than it has been in recent quarters given fundamental fundamental selling in tech.' selling in tech.' in tech.'

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