Before Nvidia’s earnings, selling pressure had already spread from the semiconductor ETFs to hedge funds
Just a moment ago, I wrote that before Nvidia’s earnings, major U.S. semiconductor ETFs saw net outflows of about $6.3 billion over the prior three weeks. Compared with the prior period—when they had been in a steady inflow from December last year through July this year—semiconductor trading has started to cool noticeably.
Now Goldman Sachs’ data offers another perspective.
Over the past 20 trading days, Goldman’s clients have still been net buyers of U.S. stocks overall, and tech stocks have also remained net buyers by roughly 0.7 standard deviations. But over the most recent five trading days, the direction suddenly flipped. Net selling of U.S. stocks has moved to nearly -2 standard deviations over the past year, and tech stocks have also shifted from prior net buying to net selling of around -1.2 standard deviations.
Prime Book mainly reflects trading activity by hedge funds and large institutions, so this isn’t the same pot of money as the ETF flows seen earlier. Earlier, ETF capital began withdrawing from semiconductors; now, hedge funds are also starting to cut their tech positions.
What’s more, this sell-off hasn’t been confined to tech. Industrials, healthcare, real estate, and financials have all been selling over the past five days. Overall, U.S. stocks have already shown signs of a clear risk contraction, while only a few sectors—such as energy—are still attracting buying flows.
So the market environment facing Nvidia this time is no longer quite the same as in the past few instances. Previously, many funds added to positions in AI and semiconductors ahead of earnings, betting that Nvidia would once again beat expectations. Now, with earnings not yet released, ETFs have already been posting consecutive outflows, and hedge funds are starting to sell tech as well—suggesting that some capital is reducing risk ahead of time.
The biggest question is whether investors will be willing to bring the money back after the earnings are released.
In the past, as long as Nvidia’s revenue beat expectations and it continued to grow in the next quarter, the market was often willing to keep pushing stocks higher. But now, with many funds having already exited early, investors’ expectations are naturally higher. Simply beating expectations by a bit may no longer be enough to satisfy the market.
So if Nvidia continues to deliver strong growth this time, the money that exited earlier still has a chance to return. But if growth starts to slow, or if next quarter’s data isn’t as good as people are hoping, the impact could easily spill over from Nvidia to the entire semiconductor and AI sector.
Just a moment ago, I wrote that before Nvidia’s earnings, major U.S. semiconductor ETFs saw net outflows of about $6.3 billion over the prior three weeks. Compared with the prior period—when they had been in a steady inflow from December last year through July this year—semiconductor trading has started to cool noticeably.
Now Goldman Sachs’ data offers another perspective.
Over the past 20 trading days, Goldman’s clients have still been net buyers of U.S. stocks overall, and tech stocks have also remained net buyers by roughly 0.7 standard deviations. But over the most recent five trading days, the direction suddenly flipped. Net selling of U.S. stocks has moved to nearly -2 standard deviations over the past year, and tech stocks have also shifted from prior net buying to net selling of around -1.2 standard deviations.
Prime Book mainly reflects trading activity by hedge funds and large institutions, so this isn’t the same pot of money as the ETF flows seen earlier. Earlier, ETF capital began withdrawing from semiconductors; now, hedge funds are also starting to cut their tech positions.
What’s more, this sell-off hasn’t been confined to tech. Industrials, healthcare, real estate, and financials have all been selling over the past five days. Overall, U.S. stocks have already shown signs of a clear risk contraction, while only a few sectors—such as energy—are still attracting buying flows.
So the market environment facing Nvidia this time is no longer quite the same as in the past few instances. Previously, many funds added to positions in AI and semiconductors ahead of earnings, betting that Nvidia would once again beat expectations. Now, with earnings not yet released, ETFs have already been posting consecutive outflows, and hedge funds are starting to sell tech as well—suggesting that some capital is reducing risk ahead of time.
The biggest question is whether investors will be willing to bring the money back after the earnings are released.
In the past, as long as Nvidia’s revenue beat expectations and it continued to grow in the next quarter, the market was often willing to keep pushing stocks higher. But now, with many funds having already exited early, investors’ expectations are naturally higher. Simply beating expectations by a bit may no longer be enough to satisfy the market.
So if Nvidia continues to deliver strong growth this time, the money that exited earlier still has a chance to return. But if growth starts to slow, or if next quarter’s data isn’t as good as people are hoping, the impact could easily spill over from Nvidia to the entire semiconductor and AI sector.
