Global hedge funds have intensified their focus on artificial intelligence-linked companies as they entered the second quarter of 2026, with a notable shift towards semiconductor and AI infrastructure firms. According to Goldman Sachs' Hedge Fund Trend Monitor, hedge funds increased their net exposure to the Information Technology sector by 853 basis points, the highest quarterly rise recorded. The report highlighted that hedge funds now hold a 10% long portfolio weight in semiconductors, while the weight in software has dropped to 6%, the lowest since 2019. Major beneficiaries of this trend include companies like Lam Research, Applied Materials, and Intel. Hedge funds have also reported impressive returns, with popular technology positions yielding a 62% return year-to-date. However, caution is emerging among investors, as short interest for median S&P 500 stocks has climbed to 3% of market capitalization, the highest since 2011. Furthermore, hedge funds are increasingly utilizing exchange-traded funds (ETFs) to enhance their equity exposure, with ETF holdings representing the highest share since the Global Financial Crisis.