Goldman Sachs analysts say a more balanced advance across stocks - moving away from the narrow concentration in a few technology leaders - has been an important contributor to mutual fund returns in recent months.
In a client note, the strategists including Ryan Hammond and Daniel Chavez attributed the change in market breadth to two main forces: a degree of optimism about the business cycle and investor caution surrounding potential disruptions from newly launched artificial intelligence models. According to their assessment, breadth has shifted from narrow conditions to roughly average levels.
The analysts pointed out that the dispersion of returns within the S&P 500 has expanded substantially and is now at some of the highest readings seen since 1980. They said that both a spreading of returns across constituents and improved market breadth have been the most influential factors for mutual fund performance over more than 30 years.
Goldman Sachs supported its observations with an internal review of quarter-end positioning for 524 large-cap active mutual funds that together manage $4.1 trillion in equity assets. That analysis found that 57% of these funds are outperforming their benchmarks so far this year, which the bank noted is the largest share since 2007.
The bank's research highlighted that large-cap core and growth managers have delivered the strongest returns to date. Part of this performance reflects relative weakness among mega-cap technology stocks, a trend Goldman tied to investor questions about when heavy investments in AI infrastructure - such as data centers - will translate into meaningful profit contribution.
At the same time, the analysts judged that the recent selloff in software stocks - driven in part by the rollout of AI models that can automate tasks these companies provide - presents only a limited risk to mutual fund returns. They observed that many funds pared back their exposure to the software industry beginning in early 2024. Still, they singled out companies such as Intuit, Cadence Design Systems, Autodesk, Atlassian, and Dynatrace as names that remain particularly sensitive to demand from mutual funds.
On a sector level, Goldman Sachs reported that mutual funds are currently most underweight the information technology sector and most overweight financials and industrials. The bank added that financials and industrials together accounted for seven of the 20 stocks that experienced the largest increases in mutual fund ownership during the fourth quarter, with notable increases led by F&G Annuities & Life and Rocket Companies.
ProPicks AI mention
The note included a promotional segment asking whether investors should be buying ADSK right now. It described a product called ProPicks AI that evaluates ADSK and other companies using more than 100 financial metrics and highlighted past winners identified by that tool, including Super Micro Computer (+185%) and AppLovin (+157%). The segment framed the AI as a way to assess fundamentals, momentum, and valuation without human bias.
The Goldman Sachs analysis frames the current market environment as more favorable for active mutual funds than the narrow, tech-heavy leadership observed previously. The bank's data indicate a meaningful shift in positioning and performance among large-cap active managers, with sector tilts and selective name sensitivity shaping outcomes.