Goldman Sachs just ran some ugly numbers on the SaaSPocalypse—and found hedge funds are dumping software and piling into semis
Wall Street has been debating the Saa SPocalypse for months, if not years. Goldman Sachs studied how hedge funds and mutual funds are approaching the space—and found a major shift in investing. Software & Services as an industry group is down 14% year-to-date and has lost 9% over the last 12 months. Semiconductors & Semi Equipment are up 38% YTD and have surged 104% in the past year. The performance gap is staggering, but it’s a symptom, not the cause. The cause is a fundamental reassessment of where AI value actually accrues — and the answer, increasingly, is not in the application layer. Goldman’s U.S. Weekly Kickstart, published May 22 and drawing on $9 trillion in equity positions at the start of the second quarter of 2026, doesn’t editorialize. The numbers make the case: hedge funds have cut software to its lowest weight in their long portfolios since 2019. Mutual funds are carrying their widest underweight in software (excluding Microsoft) since 2012. Both fund types, Goldman notes, “continued their recent portfolio rotations away from Software and toward Semis” — a line buried in the middle of the report that deserves a banner headline. This is not panic. Hedge fund net leverage is running at the 85th percentile of the last five years. These funds are not de-risking. They are making a deliberate, consensus call — in broad daylight, with near-record overall exposure — that software is the wrong place to be. Hedge funds added to LRCX, AMAT, and ASML on net during Q2. Mutual funds piled into INTC and SITM. Even Microsoft — the one software company that was supposed to be AI-proof, the one name that always survived the rotation — was cut on net by both hedge funds and mutual funds last quarter. Goldman’s own earnings projections capture the skepticism baked into its strategists’ models. Info Tech is forecast to grow earnings by 31% in 2026 — but Goldman’s top-down estimate of $92 in sector EPS contribution runs well