Hedge funds are turning to technology stocks.

Investing.com – Hedge funds have increased their risk appetite as they enter fall, raising their long positions by 277%. According to Jefferies analyst Steven DeSanctis, this is the highest level since May.

The analyst noted that this change has left "short positions at -177%, below the average" and stated that investors have made a noticeable shift towards large technology and communication services companies. The long-short ratio has reached 1.56.

In a note to its investors, Jefferies emphasized that the higher positions are occurring in areas of “Sustained Growth, Intriguing 16, Technology & Communication Services,” with hedge funds increasing their weighting in this group to over 60%. This is the highest level since October 2024.

Within this group, Broadcom and Microsoft stand out. Microsoft has become the largest net weight with a total weighting of 14.9%. Broadcom is heavily weighted at 3.7%, showing a 350 basis point increase.

Microsoft's net weight rose by 2.5%, becoming the largest overweight position at 690 basis points. Analyst DeSanctis noted that this positioning has been recorded as the “highest weight,” covering 51.4% of hedge fund net portfolios as of August 31.

In contrast, hedge funds have reduced their positions in several large companies. Jefferies reported that Apple has turned net short and is in the largest underweight situation at 830 basis points. Tesla also features among the “significant short positions.” NVIDIA reduced its position by nearly 2%, aligning with a level consistent with the S&P 500.

Cyclical stocks have lost interest, with total weight dropping to 44.6%. Additionally, industrial sectors hold the largest underweight situation. Jefferies stated that hedge funds held all three bond alternative sectors net short, with food and energy sectors holding over 2% in short positions.