Hedge Funds Slash Exposure to ‘Magnificent Seven’ Stocks to Two-Year Low Ahead of Earnings Season

Global hedge funds significantly reduced their holdings in the so-called Magnificent Seven mega-cap tech stocks last week, cutting exposure to the lowest level in two years, according to a client note from Morgan Stanley, cited by Reuters.

The investment bank revealed that between Monday and Wednesday of last week, over 60% of total hedge fund selling was concentrated in the Magnificent Seven group—Tesla, Apple, Microsoft, Amazon, Nvidia, Meta, and Alphabet—highlighting a cautious outlook among portfolio managers ahead of upcoming earnings.

Tesla and Alphabet to Lead Upcoming Tech Earnings

Tesla (NASDAQ: TSLA) will be the first of the group to report earnings, with results due on 22 April. Alphabet (NASDAQ: GOOGL) will follow on 24 April, potentially setting the tone for broader sentiment towards mega-cap tech shares in Q2.

Magnificent Seven Underperforming in 2025

So far in 2025, all seven stocks have lagged behind the S&P 500 index. Tesla shares are down approximately 44%, while Alphabet has dropped by about 22%, underscoring growing investor scepticism towards large-cap tech amid macroeconomic uncertainty and stretched valuations.

Investor Sentiment Shifts Away from Big Tech

Investor interest in the Magnificent Seven appears to be waning. A recent Bank of America survey indicated a major shift in sentiment: once considered the most crowded trade by nearly 60% of investors, only 24% now view the group that way. In contrast, gold has emerged as the top trade for 49% of respondents, suggesting a flight to perceived safe-haven assets.

Hedge Funds Broaden Sell-Off Across Sectors

Morgan Stanley also reported that hedge fund selling extended beyond tech, impacting shares in sectors including healthcare insurance, aerospace, defence, biotechnology, and leisure industries such as hotels and restaurants.

(Sources: reuters.com)