Hedge Funds Turn Underweight on AI for First Time Since Early 2023

Hedge funds have shifted their broader AI exposure to underweight for the first time since early 2023, marking their longest continuous period of portfolio risk reduction in more than 15 years.

Managers are concerned that large AI infrastructure investments are not producing returns quickly enough. Recent earnings from Alphabet and Amazon have also unsettled investors.

Hedge fund purchases of U.S. equities have come mostly from short covering, while gross leverage has declined. Those purchases offset only 40% of recent technology-sector sales.

Hedge funds have also fully reversed their cumulative net buying in global AI stocks since the start of 2025.