(Bloomberg) -- Professional speculators are turning risk-on by gobbling up technology shares, after largely missing out on the new-year rally in the stock-market’s biggest winners.

Hedge funds that make both bullish and bearish equity wagers snapped up computer and software makers for 12 straight sessions through Wednesday, according to data compiled by Goldman Sachs Group Inc.’s prime brokerage. While unwinding short sales dominated flows during the first week of February, the group has added to long positions in recent sessions — a sign of growing conviction in the information technology sector. 

The improving appetite for tech shares has defied the advance in Treasury yields, a development that supposedly creates valuation pressure for richly priced stocks in particular. Yet with tech going from the bear market’s worst loser last year to the best performer in the S&P 500, fear of missing out has creeped up. At the same time the two-day market retreat this week on fresh fears over rising interest rates risks spurring a deeper stock rout — just as the fast money ramps up its tech purchases.

“Momentum play is overruling that rule of thumb that higher interest rates should be bad for tech,” said Craig Callahan, chief executive officer at Icon Advisers Inc. and author of “Unloved Bull Markets.” “Hedge funds weren’t in there early. They’re now chasing.” 

IT companies were off to a strong start to 2023, bolstered by speculations that the Federal Reserve might cut interest rates later in the year. While that optimism has since proved misplaced, tech stocks kept their leadership. Despite a lackluster earnings season, shares like Meta Platforms Inc. have rallied as a flurry of job cuts eased concern over falling profitability. 

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After shunning tech shares for much of 2022, hedge funds are now warming up to the cohort. Their share purchases on Tuesday rose to a one-month high, with almost all subsectors seeing net inflows, according to data compiled Goldman’s team including Vincent Lin. 

This type of renewed investor interest may explain why tech equities have overcome the valuation headwind from the bond market. While two-year Treasury yield has added 49 basis points this month, the tech-heavy Nasdaq 100 also climbed, rising almost 3%. The last two times when yields strengthened this much during the summer of 2022, the index dropped 5% in August and roughly 11% the following month.  

The risky corner has seen more pronounced gains, with a Goldman index tracking unprofitable tech extending their year-to-date gains to 24%. 

“The higher rates go, the higher high-beta stocks go — that doesn’t make a ton of sense,” said Danny Kirsch, head of options at Piper Sandler & Co. “You’d think higher rates put pressure on risky assets. That doesn’t seem to matter right now.”

Holding a defensive stance helped the hedge fund industry fare better during 2022’s bruising selloff. Now it’s holding them back. Long/short funds tracked by Goldman are up 3.4% this year through Tuesday, less than half the gain from an MSCI index.  

Despite the latest buying spree, hedge funds’ tech exposure remains subdued with their long/short ratio sitting in the lowest decile of a five-year range, Goldman data show. 

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