Hedge funds have significantly reduced their exposure to US technology stocks, marking the fastest selling pace since Goldman Sachs began tracking this data in 2016. This shift occurred in the week ending June 25, following a challenging June for many AI and technology stocks as investors began to take profits and reallocate funds to other market segments. This massive sell-off also marks the largest overall sale of US stocks since the April 2025 "Liberation Day" market selloff.
The selling was particularly pronounced in the Magnificent Seven stocks, which include Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla. These stocks saw their share in hedge funds' US stock holdings drop from approximately 21.5% at the start of 2026 to 14.5%. This 7 percentage point decline represents the biggest six-month drop since the 2022 bear market, bringing their exposure to a three-year low. The collective market value of these companies decreased by over $2.3 trillion during June.
The reduction in technology exposure by institutional investors suggests a reassessment of the market's most concentrated trade. The selling volume specifically in technology and AI-related stocks exceeded levels seen in August 2024, when the Nasdaq 100 experienced a correction. While Tesla is the only Magnificent Seven stock analysts expect to decline with about 4% downside, Nvidia offers the highest anticipated upside at around 54%, followed by Microsoft with about 50% and Meta with roughly 45%.
This broad reduction in exposure reflects a combination of valuation discipline, profit-taking, macroeconomic uncertainties, and portfolio risk control. The upcoming earnings season will be crucial for the sector, with investors closely watching companies like Nvidia, Microsoft, Amazon, and Meta for indications that substantial AI spending is beginning to yield stronger returns. Goldman Sachs noted that the de-grossing activity, characterized by long sales exceeding short covers, signifies a scale of risk unwinding that surpasses any period in the last decade, with the exception of the meme stock episode in early 2021.
