During what markets characterized as a "historic" second quarter, hedge funds made substantial bets on technology giants like Microsoft while significantly reducing positions in Chinese tech stock Alibaba.
Despite initial market turbulence from Trump's tariff policies in early April, U.S. equity markets subsequently staged a strong rebound. The S&P 500 recorded its best quarterly performance since December 2023, surging approximately 25% from April lows, while the Nasdaq 100 achieved its strongest gains in over two years.
Amid dramatic market volatility, hedge funds executed large-scale portfolio adjustments. Analysis of 716 hedge funds' second-quarter 13F filings revealed:
Microsoft emerged as the most favored target, with fund holdings increasing by $12 billion to $47 billion; meanwhile, Chinese tech giant Alibaba experienced the largest position reduction, with holding values declining by $1.55 billion.
Data shows the combined holdings of 716 hedge funds increased from $622.94 billion three months prior to $726.54 billion. From a sector allocation perspective, technology stocks commanded the largest portfolio weight at 23%, with financial stocks ranking second at 17%.
**Microsoft Becomes Top Holdings Target, Alibaba Faces Largest Cuts**
In second-quarter portfolio restructuring, technology stocks received significant increases from hedge funds. Microsoft became the most valuable asset held by hedge funds at $46.83 billion, with position sizes growing by $12 billion from the first quarter to $47 billion.
Bridgewater emerged as Microsoft's largest incremental buyer, adding 905,600 shares, while Walleye Capital followed closely with an increase of 882,900 shares.
The substantial growth in hedge fund position values for Microsoft stemmed from both net purchases and the company's soaring stock price. Driven by artificial intelligence concepts, Microsoft's stock recorded significant gains in the second quarter, delivering substantial returns to investors.
Additionally, Netflix also attracted strong interest, demonstrating hedge funds' continued confidence in high-growth sectors like streaming and cloud computing.
Chinese technology giant Alibaba became the target of the largest hedge fund position reductions in the second quarter, with holding market value declining by $1.55 billion. Bridgewater led the selling, disposing of 5.66 million shares, while Coatue Management also reduced its position by 2.93 million shares.
This reduction trend reflects hedge funds' cautious stance toward Chinese concept stocks.
**Technology Stocks Hold Largest Portfolio Weight**
From an overall allocation perspective, technology stocks occupied the largest weight in hedge fund portfolios at 23%, demonstrating investor confidence in the sector's long-term growth prospects. Financial stocks ranked second with a 17% weight, reflecting optimistic expectations regarding interest rate environments and economic recovery.
In contrast, the energy sector saw the least growth in investment value. Arrowstreet Capital LP reduced its position in Brazilian petroleum company stocks by 21.2 million shares, representing the investment group's largest reduction, while Oaktree Capital Management LP also cut its position by 2.66 million shares.
Regarding individual stock operations, Amazon received increases or new positions from 177 investment institutions, making it the most favored stock by institutions. In contrast, Meta platforms saw reductions or complete exits from 147 investors, making it the most heavily sold individual stock.
Notably, facing UnitedHealth Group's sharp decline of nearly 40% in the second quarter, Warren Buffett and hedge fund titan Tepper chose contrarian operations, substantially purchasing shares of this healthcare giant. This move exemplifies seasoned investors' strategy of seeking value investment opportunities during market panic.