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Goldman Reports Hedge Funds Embracing Near-Term A.I. Beneficiaries

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Hedge Funds Embrace Tech Stocks Tied to Artificial Intelligence

According to Goldman Sachs, hedge funds have shown significant enthusiasm for tech stocks related to artificial intelligence (AI) during the second quarter. Goldman Sachs analyzed the holdings of 744 hedge funds with $2.4 trillion in gross equity positions at the beginning of the third quarter, based on regulatory filings. Their equity analysts identified 11 stocks as near-term AI beneficiaries. During the last quarter, smart money hedge funds continued to increase their investments in Nvidia, following the chipmaker's impressive forecast. Appaloosa Management's David Tepper significantly raised his stake in Nvidia, making it his largest holding worth $432 million by the end of June. Hedge funds also showed interest in other prominent tech companies with recent developments in AI, such as Microsoft, Meta, and Amazon. Microsoft's announcement of a multiyear, multibillion-dollar investment in ChatGPT maker OpenAI and Meta's unveiling of their own AI computer chips attracted hedge fund investments. Additionally, several hedge funds added Credo Technology, a lesser-known semiconductor company, to their portfolios last quarter. The stock has seen a 13% increase in value this year. Semiconductor companies manufacturing advanced chips have become popular investments as investors chase the AI boom. Marvell Technology is another hedge fund favorite, as per Goldman Sachs' analysis. Software and cloud players Adobe and Salesforce also made the list of AI-related stocks favored by hedge funds. Starboard Value's Jeffrey Smith expressed optimism about Salesforce's growth potential, predicting a 30% rally in the stock due to the AI boom. Smith, known for his activist stake in 2022, believes there is still room for Salesforce to expand. In conclusion, hedge funds have shown a strong interest in tech stocks tied to artificial intelligence, with Nvidia being a particular favorite. The AI-related developments of Microsoft, Meta, and Amazon have also attracted hedge fund investments. Lesser-known semiconductor companies like Credo Technology have seen increased attention, while established players like Marvell Technology, Adobe, and Salesforce continue to be favored by hedge funds. The AI boom is driving investor interest in companies at the forefront of this transformative technology.

Hot Take: The Impact on New Businesses

The surge of hedge fund investments in AI-related tech stocks presents an intriguing landscape for new businesses. This trend indicates a significant shift in investor interest towards companies at the forefront of AI technology, which can have substantial implications for startups.

Opportunities and Challenges in AI

New businesses venturing into AI can leverage this trend to attract investments. However, they also face the challenge of standing out in an increasingly competitive market. Companies like Nvidia, Microsoft, and Amazon have set high standards with their AI-related developments, raising the bar for newcomers.
Strategic Planning for AI Startups
For AI startups, strategic planning should involve not just technological innovation but also a thorough understanding of the investment landscape. They need to identify potential investors, understand their interests and investment patterns, and tailor their business strategies accordingly. In conclusion, the growing interest of hedge funds in AI-related tech stocks can be both an opportunity and a challenge for new businesses. By understanding these trends and adapting their strategies accordingly, AI startups can position themselves for success in this rapidly evolving market. The AI boom is not just about technological innovation; it's also about understanding and navigating the complex investment landscape.
Story First Published at: https://www.cnbc.com/2023/08/22/hedge-funds-are-embracing-these-near-term-ai-beneficiaries-according-to-goldman.html
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