Hedge funds increased purchases of major technology stocks last week after several weeks of heavy selling pressured valuations, signalling renewed interest in select tech names despite lingering market concerns about the impact of artificial intelligence on profits.

Managers targeted large-cap leaders and companies considered undervalued due to recent sector declines, hoping to capitalise on longer-term growth narratives.

The move reflects confidence that short-term volatility may be overstated in parts of the tech space. Strategists said active funds are positioning for a rebound as earnings reports and policy signals unfold.

Investment flows into tech names were measured, with funds focusing on quality names with robust earnings history and cash flow strength, rather than speculative or early-stage firms more vulnerable to AI disruption narratives.

The strategy underscores a broader shift toward defensive quality amid ongoing uncertainty.

Sector analysts noted that hedged positions can help manage volatility while retaining exposure to innovation-led growth.

Other investors said that diversified tech allocations may improve risk-adjusted returns as markets digest near-term catalysts.

Despite renewed buying, overall tech valuation multiples remain under pressure, a sign that markets are still cautious about future profit trajectories in AI-linked industries.

Yet, hedge fund interest suggests confidence in structural technology demand over the longer term.

In coming sessions, earnings releases from major tech names will be key sentiment drivers for both active and passive investors in the sector.

Source: Reuters