According to Nick Savone of Morgan Stanley, hedge funds have sharply reduced their positions in the artificial intelligence trade while retail investors have aggressively bought Nvidia. Their net leverage fell to the 0th percentile over the past twelve months, indicating lower market exposure than at any other point during that period. Nvidia, Morgan Stanley’s top semiconductor pick in early October with a $300 price target, subsequently fell more than 25% and lost that position in November. Despite professional investors reducing their exposure, the S&P 500 rose 2.5% in the week following Savone’s comments, ending a four-week losing streak, but the divergence in positioning could lead to larger price swings in technology stocks.
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