Fresh Blow to Hedge Funds as Software Darlings Start to Crumble
- Smart money loves software, hates semis amid trade, slowdown
- Semi profit growth seen recovering to beat software next year
Source: Getty Images
This article is for subscribers only.
A favorite strategy of hedge funds that splits technology stocks into hardware and software makers has been sputtering for months. It finally blew up.
The smart money piled into software shares such as Microsoft and Atlassian while cutting stakes in the likes of AMD and Intel for almost two years. The split created a dichotomy in exposure not seen since at least 2010, according to primary brokerage data from Morgan Stanley. Avoiding chips has burned fund managers since January as the group rallied 38%. And now, the outsize bet on software firms has stopped working, with some erstwhile high-flyers mired in declines exceeding 20%.