(HedgeCo.Net) Major Wall Street hedge funds significantly reduced exposure to the “Magnificent Seven” tech giants in the third quarter of 2025, according to 13F filings released last week. Funds cut holdings in Nvidia, Amazon, Alphabet, and Meta, while shifting capital toward sectors like application software, e-commerce, and payments.
Reuters reported that this rotation reflects growing caution over sky-high valuations in AI-driven mega-caps, even as some funds, including Balyasny Asset Management, dramatically increased stakes in Apple. The moves come after a year where the Magnificent Seven drove much of the S&P 500’s gains, but concerns about an AI bubble are mounting.
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Nvidia, the poster child for AI enthusiasm, saw reductions from multiple high-profile managers, including a 14% cut by one firm. Bridgewater Associates and others have also lightened positions, echoing warnings from investors like Michael Burry, who recently closed his fund citing AI overvaluation.
The trimming isn’t a full exodus—many funds remain overweight tech—but it signals profit-taking after massive runs. Nvidia shares, up over 150% year-to-date at points, have cooled amid supply chain worries and competition fears.
Meanwhile, hedge funds are hunting value elsewhere. Increased bets in software and payments suggest managers see opportunities in second-tier tech and fintech, where valuations are more reasonable and growth potential remains strong.US hedge funds trim stakes in ‘Magnificent Seven’ stocks in third …
This reallocation highlights hedge funds’ role as agile allocators, quick to rotate when momentum fades. As Q4 unfolds, all eyes are on whether this caution proves prescient or premature in a market still buoyed by AI hype.