Hedge Funds Turn Underweight on AI Stocks in Record Portfolio De-Risking

Hedge funds have cut portfolio exposure to artificial intelligence to Underweight for the first time since early 2023, according to Morgan Stanley. Cumulative gross hedge fund flows fell 8% from their June peak in the largest sustained de-grossing on record, with gross leverage slipping to 207%. The retreat follows an aggressive late-October selloff where funds erased all net AI equity purchases accumulated since early 2025 across five consecutive sessions. That unwind contributed to an estimated $2 trillion loss from the Nasdaq-100, while recent tech buying recouped only 40% of the preceding three weeks of sales.