In the first quarter of 2026, U.S. hedge funds and mutual funds made a significant shift in their investment strategies, moving away from software stocks and increasing their holdings in the semiconductor sector. According to Goldman Sachs' reports, this rotation has led to semiconductors reaching their highest-ever weighting in hedge fund portfolios. Hedge funds, managing $4.6 trillion in assets, and mutual funds, with $3.9 trillion, both contributed to this trend, with hedge funds achieving a 7% return year-to-date. The data reveals that hedge funds have increased their net leverage to the highest level in nearly a year, while mutual funds have raised their cash-to-asset ratio slightly, indicating a cautious approach. Notably, hedge funds increased positions in semiconductor companies like LRCX, AMAT, and ASML, while mutual funds favored INTC and SITM. Meanwhile, software holdings have declined to their lowest levels since 2019 for hedge funds and 2012 for mutual funds, excluding Microsoft. Sector-wise, both types of funds showed a consensus in overweighting industrials but diverged in their approach to technology stocks. Hedge funds increased their exposure to information technology, while mutual funds reduced theirs. Additionally, four stocks—Boeing, Mastercard, Marvell Technology, and Visa—emerged as shared favorites, outperforming the S&P 500 index by 3 percentage points year-to-date.