GOOG is now the apple of the eye of fund managers
Apple is now in second place, followed by Microsoft, which bumped Exxon Mobil out of third place. Financial heavyweights have also moved up: Wells Fargo and JP Morgan are now in fourth and fifth place, respectively, while Exxon Mobil and Johnson & Johnson and other slower growing high yielding stocks have moved down the list.
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This is the first time since 2010 that the top three stocks held by mutual funds have been dominated by technology. Experts say that's because investors are more confident and more focused on investing in growth, and not as fearful as when the market started to recover from the bottom in March 2009.
"With an uptick in economic activity, growth stocks are now primed for outperformance," said Chris Grisanti, portfolio manager at Grisanti Capital Management, adding that the dividend income play in this low-rate environment is overcrowded.
These dividend plays have been on a tear this year—the S&P Healthcare and Consumer Discretionary sectors, both of which have on average a higher dividend yield than the S&P 500, are up over 30 percent this year.
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Given tech's dominance in this year's fund holdings, the average dividend yield of the top 10 stocks held by funds has slid to 2.58 percent compared with 2.61 percent in 2012.
BNY Mellon's Jack Malvey said the street is focused on finding stocks that are not as exposed to the volatility in interest rates and that's why we're seeing high growth sectors like tech get a bid. "Further enthusiasm in the next technology wave—specifically in big data—a concept that has been well advertised, has provided a high level of excitement around investing in next generation technology," he said. Malvey also pointed out that the global recovery and improvement in economic data have pushed investors into technology.
Although not everyone believes that tech could continue its move higher. While Google is the top stock held by mutual funds, Rick Summer, analyst at Morningstar, said: "Google is not an exciting opportunity given that it has already had a strong run." Google, broke above $1,000 last week, and is trading at a premium to the S&P 500.
Of the 3,700 funds tracked by Lipper Funds, 944 are invested in shares of Apple, while 841 hold Google. —By CNBC's Seema Mody. Follow her on Twitter: @SeemaCNBC.