US Hedge Funds Shift Away from Big Tech as Portfolios Rebalance in Third Quarter
Major hedge funds scaled back their exposure to leading technology giants while expanding into software, payments and select industrial and healthcare names, signaling a strategic portfolio reshuffle amid cooling AI valuations.
Wall Street’s largest hedge funds trimmed their stakes in several of the so-called Magnificent Seven stocks during the third quarter, marking a notable shift away from some of the market’s most dominant technology companies.
The moves reflected a broader recalibration as investors responded to easing valuations in the artificial intelligence sector and sought opportunities across a wider range of industries.
Fund managers reduced exposure to major tech names including Nvidia, Amazon, Alphabet and Meta, following a period of intense enthusiasm earlier in the year.
As AI-driven stock prices began to settle, hedge funds directed more capital toward application software, e-commerce players and payments companies that showed more attractive entry points.
The overall market environment during the third quarter showed steady strength, with the S&P 500 rising nearly 8% and the Nasdaq 100 gaining around 9%.
Bond markets also climbed on expectations of policy easing, pushing benchmark yields lower and offering additional support to risk assets.
Bridgewater made a series of notable shifts, increasing its exposure to payments and software companies even as it reduced stakes in major tech leaders.
The firm boosted its holdings in Adobe, Dynatrace and Etsy, demonstrating clear interest in firms tied to digital services and enterprise tools.
Discovery Capital expanded into new positions across multiple sectors, taking fresh stakes in Alphabet, steelmaker Cleveland-Cliffs and health insurers such as Cigna and Elevance Health.
These moves indicated confidence in both select industrial opportunities and long-term healthcare demand.
The quarter also showed reduced enthusiasm for some of the largest technology stocks. Lone Pine Capital and Tiger Global sharply lowered their positions in Meta Platforms, while several major funds, including Coatue and Bridgewater, scaled back their exposure to Nvidia as AI valuations normalized.
The disclosures came through quarterly 13-F filings, which offer insights into institutional holdings though they reflect past decisions rather than real-time positions. Despite their limitations, the filings remain a key window into the strategies of influential, often private, hedge fund managers.
Bridgewater’s portfolio adjustments were particularly significant, with the fund cutting Nvidia holdings by nearly two-thirds and trimming Alphabet shares by more than half. These shifts followed a strong performance in the first nine months of the year, during which the firm outpaced several major peers.
Meanwhile, Balyasny Asset Management increased its stake in Apple by several multiples, emphasizing the staying power of certain mega-cap names even amid broader rotation. Such moves highlighted the varied approaches funds are taking toward the most valuable companies in the market.
Coatue Management revised its positions around major AI-related stocks, reducing its Nvidia shares by over 14% in alignment with caution displayed by other prominent investors. The company’s adjustments underscored a growing trend of rebalancing within portfolios tied heavily to artificial intelligence.
Elsewhere, Berkshire Hathaway revealed a sizable new investment in Alphabet valued at more than $4 billion. The firm also continued its gradual reduction of Apple holdings, marking the last portfolio update before a leadership transition at the company.
As hedge funds reassessed risk and opportunity during the quarter, the overall picture reflected a shift toward diversification and selective positioning.
With valuations stabilizing and new sectors gaining investor attention, the third quarter highlighted a more measured approach to navigating the evolving technology-driven market landscape.
