Goldman Sachs data shows mutual funds hold their smallest software exposure since 2012 amid AI-driven sell-offs and slowing revenue growth.
Mutual funds have reduced their software stock exposure to the lowest level since at least 2012, according to Goldman Sachs research. The shift reflects broader skepticism toward the sector, with hedge funds also cutting software holdings to their smallest weight since 2019 while increasing semiconductor positions to record highs.
The S&P Software & Services Index has fallen 12% year-to-date, with major names like Salesforce, Adobe, and ServiceNow down 25% to 30%. Investors fear artificial intelligence could render traditional enterprise software obsolete, prompting indiscriminate selling. Compounding concerns, software firms face slowing revenue growth as enterprise clients delay purchases.
In contrast, mutual funds and hedge funds have added to semiconductor stocks, including Intel, Lam Research, Applied Materials, and ASML. The divergence highlights a sector rotation away from software toward hardware perceived as critical to AI development.