Institutional investors appear to be taking a more selective approach to the stock market after building sizable positions in technology and AI-related names over the past few years.
The latest 13F filings show that money managers were not making aggressive moves in either direction during the second quarter. Instead, they appear to be trimming some crowded positions while adding to companies they believe can benefit from the next phase of the AI boom, per Reuters.
No Clear Verdict on Big Tech’s Future Course: Tap Via ETF?
A Reuters analysis of 6,371 institutional investors found that nearly 44% reduced their holdings of the Magnificent Seven, while 42% increased or initiated positions. That near-even split suggests that there is no clear consensus on where mega-cap technology stocks go from here.
Still, some areas stood out. Semiconductors attracted stronger institutional buying, while several AI infrastructure companies continued to gain attention.
So, which stocks could investors consider when looking to follow the smart money?
Semiconductors Still Attract Institutional Money
The semiconductor sector was one of the strongest areas in the latest 13F data. About 48% of institutions were net buyers of major semiconductor stocks, compared with 34.5% that were net sellers. This is encouraging because semiconductor stocks have already enjoyed a major AI-driven rally.
iShares Semiconductor ETF SOXX currently has a Zacks Rank #1 (Strong Buy). The ETF or the basket approach minimizes the company-specific concentration risks.
CoreWeave Rides the AI Infrastructure Wave
CoreWeave CRWV is one of the more interesting AI infrastructure names to attract institutional interest. The company provides cloud infrastructure designed for demanding AI workloads, giving businesses access to powerful GPUs without having to build their own infrastructure from scratch.
However, CoreWeave is a more volatile bet than established technology giants. Hence, investors can play the CRWV-heavy ETFs like Roundhill Neocloud ETF NCLD and Themes Cybersecurity ETF SPAM.
Arista Networks: Smart Money Flow into AI Networking
Arista Networks ANET emerged as an attractive position to institutional investors. The company provides high-speed networking solutions used by cloud and hyperscale data-center operators.
As AI clusters become larger, the need for faster and more efficient networking should increase as well. The stock is heavy on iShares U.S. Telecommunications ETF IYZ.
Broadcom – Another AI Bet
Broadcom AVGO provides another way to follow institutional money into AI. Broadcom has exposure across semiconductors and infrastructure software. Its custom AI accelerators and networking products are particularly important as hyperscalers expand their AI capabilities.
VanEck Fabless Semiconductor ETF SMHX and Strive U.S. Semiconductor ETF SHOC are examples of two Broadcom-heavy chip ETFs.
Tiger Global Makes a Contrarian Move
Institutional positioning wasn't uniformly bullish across the technology sector. Tiger Global Management, for example, reduced its stakes in several Magnificent Seven companies, including Microsoft MSFT, Nvidia NVDA and Meta Platforms META, as quoted on Reuters.
But the hedge fund increased its position in Intel INTC. The company has been working to rebuild its manufacturing capabilities and establish itself as a major foundry player. State Street SPDR NYSE Technology ETF XNTK is an Intel-heavy fund.
Energy Isn't Getting the Same Love
Interestingly, energy stocks did not enjoy the same institutional enthusiasm.
About 40.3% of institutions were net sellers of a group of major energy companies compared with just 28% that were net buyers.
However, there were exceptions. OnyxPoint Global Management increased its exposure to energy names, including BP BP and Devon Energy DVN, per the same Reuters article.
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This article originally published on Zacks Investment Research (zacks.com).
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