Hedge Funds Slash Netflix Holdings, Double Down on Nvidia AI Bet

Top hedge funds pivot from streaming giant Netflix to artificial intelligence leaders Microsoft and Nvidia amid record tech exposure

Key Takeaways

• Netflix positions slashed to 0.8% as hedge funds cut their largest overweight position in May, shifting away from subscription-based growth models.
• Nvidia exposure surged 500 basis points to 8.9% weight as funds capitalize on AI infrastructure demand and the stock’s 1,000% rise since early 2023.
• Microsoft becomes top holding at 13.7% while Amazon maintains 10.3%, reflecting sustained confidence in cloud monetization and AI-driven revenue expansion.

Introduction

Hedge funds executed a dramatic portfolio rebalancing in May, abandoning their largest overweight position in Netflix while doubling down on artificial intelligence infrastructure plays. The strategic shift reflects growing conviction that AI-driven cloud platforms offer superior monetization prospects compared to traditional subscription models.

According to Investing.com data, institutional investors trimmed Netflix holdings to just 0.8% while significantly boosting Nvidia exposure and maintaining substantial stakes in Microsoft and Amazon. The moves signal a fundamental reassessment of growth trajectories in technology’s leading sectors.

Key Developments

The Jefferies “Sweet 16” portfolio weight climbed to 46.4% from 45.4% the previous month, though hedge funds’ overweight position contracted to 9.5% from 10.5% as the broader S&P 500 gained momentum. Netflix, previously the largest overweight holding, saw its position reduced dramatically as funds rotated toward AI beneficiaries.

Microsoft emerged as the top holding with a net weight of 13.7%, while Amazon held steady at 10.3%. Nvidia’s weight reached 8.9% after funds increased exposure by over 500 basis points, positioning the chipmaker as a core AI infrastructure play.

Apple remained the largest underweight at -4.0%, maintaining its net short position among institutional portfolios. The iPhone maker continues facing skepticism over its AI strategy compared to more aggressive competitors in the space.

Market Impact

Hedge fund long exposure reached 296% at the end of May, marking the highest level since November 2022 and approaching the all-time peak of 327%. Short positions widened correspondingly to -195.8%, indicating increased conviction in selected growth names.

Technology’s share in portfolios expanded by 2.5 percentage points to 27.6%, though it remained 4 percentage points underweight versus the S&P 500. Communication services experienced the steepest sector decline, dropping 10% to 13.3% and reaching its lowest level since November.

Health care became the largest sector overweight, surging 430 basis points to 25.8% and exceeding the S&P 500’s weighting by 16 percentage points. Consumer staples remained the most heavily shorted group at -4.1% net positioning.

Strategic Insights

The portfolio shifts highlight institutional preference for diversified AI monetization models over single-revenue-stream growth stories. Microsoft and Amazon offer multiple pathways to capture AI spending through cloud services, enterprise software, and infrastructure, while Netflix relies primarily on subscriber acquisition and advertising tier adoption.

Nvidia’s prominence reflects the ongoing AI capital expenditure supercycle, with hyperscale cloud providers maintaining aggressive spending on compute and networking infrastructure. The semiconductor leader benefits directly from this trend while enabling broader AI adoption across enterprise customers.

The top 10 long positions now constitute 64% of hedge funds’ net portfolios, demonstrating concentrated conviction in large-cap technology leaders. This focus on category dominators suggests funds prioritize companies with established moats and clear AI leverage over speculative plays.

Expert Opinions and Data

Jefferies strategist Steven G. DeSanctis observed that hedge funds increased Nvidia exposure significantly after “blockbuster” results from major customers including Microsoft and Meta. The moves signal confidence in AI infrastructure’s durability and the persistence of enterprise spending on next-generation computing capabilities.

“Last month, NFLX was the largest overweight, but hedge funds trimmed their position to just 0.8% by the end of May,” DeSanctis noted. “MSFT and AMZN were each above 10%,” highlighting the magnitude of the rotation from media to cloud infrastructure.

Other prominent overweights included Meta Platforms at 8.7% and Broadcom at 5.0%, both benefiting from AI-related demand trends. These positions reflect broader institutional conviction that AI infrastructure providers maintain pricing power and margin expansion opportunities.

Conclusion

Hedge funds’ May positioning reveals a clear preference for companies with multiple AI monetization vectors over those dependent on traditional growth metrics. The dramatic rotation from Netflix to Nvidia, combined with sustained conviction in Microsoft and Amazon, underscores institutional belief in the durability of AI-driven revenue streams.

The concentrated nature of current holdings, with technology leaders dominating portfolio allocations, positions hedge funds to benefit from continued enterprise AI adoption while maintaining exposure to established cloud computing franchises.