Goldman Sachs just ran some ugly numbers on the SaaSPocalypse—and identified a major shift
Goldman Sachs’ May 22 U.S. Weekly Kickstart, citing about $9 trillion in equity holdings at the start of Q2 2026, says hedge funds cut software to the lowest long-portfolio weight since 2019 and mutual funds (excluding Microsoft) to the widest underweight since 2012, rotating toward semiconductors. It notes hedge funds added to LRCX, AMAT and ASML, while mutual funds increased INTC and SITM, and Microsoft was cut net by both. Goldman projects 2026 IT earnings growth of 31% but estimates $92 sect
How this was made
The 30-second read
Why it matters
The tradable signal is institutional allocation: net additions to select semi names and net trimming even of MSFT, plus company-specific AI/governance messaging from NOW.
Market read
This is a sector rotation and AI-value-chain narrative shift with explicit net-buy/net-sell references for multiple liquid U.S. tickers.
What to watch
The piece doesn’t quantify how much of the rotation is valuation vs earnings revisions; also, it highlights software incumbents may adapt, limiting permanent downside for quality names.
Background
Fortune summarizes Goldman’s positioning work (U.S. Weekly Kickstart) showing hedge funds and mutual funds rotating away from software toward semiconductors, alongside a thesis shift on where AI value accrues.
Ticker impact
Goldman notes hedge funds added to LRCX on net during Q2 as portfolios rotated away from software toward semis.
Near-term relative strength vs software peers; directionally supportive if the rotation continues.
The article cites net buying by hedge funds in Q2, a tangible flow signal that can support price performance even without company-specific fundamentals.
The report says hedge funds added to AMAT on net during Q2 amid rotations from software into semiconductors.
Potential continued outperformance vs software; volatility possible if the semi narrative reverses.
Net institutional additions are cited, but the piece is macro/sector framing rather than AMAT-specific news.
Goldman’s U.S. Weekly Kickstart cited hedge funds adding to ASML on net during Q2 as software weights hit lows.
Support for relative performance as long as semi allocation remains favored.
The article provides a direct flow fact (net additions) but no ASML-specific catalyst.
Mutual funds piled into INTC on net during Q2 as they rotated away from software toward semis.
Mild-to-moderate upward bias vs software; timing depends on whether the rotation broadens.
The cited net buying is supportive, but the story is not about INTC fundamentals or guidance.
The article states mutual funds piled into SITM on net during Q2 alongside the broader shift toward semis.
Relative strength potential if semi inflows continue; otherwise mean reversion risk.
Net institutional additions are cited, but there’s no company-specific development beyond positioning.
Even Microsoft was cut on net by both hedge funds and mutual funds last quarter, despite being viewed as AI-proof.
Near-term downside/underperformance risk vs other AI beneficiaries if the software de-rating persists.
The article explicitly cites net trimming by both hedge funds and mutual funds, which can pressure the stock absent a new catalyst.
ServiceNow’s executives told Fortune the “era of sidecar AI is over,” betting on its Context Engine for outcomes.
Potential positive read-through for NOW as investors align with the ‘context/data’ framing.
This is direct company commentary at Knowledge 2026, but the article doesn’t provide financial results or guidance changes.
Market effects
If AI value is reassessed away from application wrappers, software multiples may remain pressured while semis capture incremental risk appetite.
Primarily U.S. fund positioning is cited, but the rotation can spill into global semi/software relative trades.
The ‘AI value accrues in infrastructure/context’ framing can influence cross-border allocation to semis and enterprise workflow platforms.
Counterpoint
The article itself flags a potential narrative-driven semi boom (FOMO) and suggests software productivity gains are real—so the rotation could reverse if AI monetization evidence shifts.
Key entities
- financial_institutionGoldman Sachs
Published positioning analysis (U.S. Weekly Kickstart) citing software underweights and semi additions.
- companyServiceNow
Executives at Knowledge 2026 said sidecar AI is over and emphasized its Context Engine approach.
- companyMicrosoft
Cited as cut on net by both hedge funds and mutual funds last quarter.
