Hedge funds just hit the brakes on tech

The crowd that never blinks just blinked

Hedge funds have reportedly made their biggest two-week cut to U.S. information technology exposure in 10 years, according to market commentary from The Kobeissi Letter. In plain English: the money that’s been riding the tech rocket ship is suddenly acting like it heard the words “gravity exists.”

The move was described as classic profit-taking, with long sales outpacing short covers by 1.5 to 1. That’s a fancy way of saying funds were selling winners faster than they were betting against losers, which usually means the portfolio managers are looking at their recent gains and thinking, “yeah, maybe we should not get too cute here.”

Semis got the biggest haircut

The pullback wasn’t spread evenly. Nearly every tech subsector saw exposure cuts, but semiconductors and chip equipment got the worst of it. That’s notable because semis have been the market’s beloved golden child lately — the group everyone and their spreadsheet has been chasing thanks to AI demand.

The irony? The two biggest semiconductor ETFs had monster April runs:

• SOXX jumped 40.4% in April, its best monthly gain in 25 years
• SMH rose 32.2%, its strongest month ever

So when you see funds trimming semis after that kind of sprint, it’s less “panic” and more “we just made a fortune and would like to keep it.”

The Magnificent Seven aren’t magical anymore

Even the mega-cap tech names are feeling the air leak out of the balloon. The letter said hedge funds sold the Magnificent Seven in 4 of the last 5 trading sessions, right as those companies are talking about spending a jaw-dropping $710 billion on AI over the next few years.

That includes:

• Amazon: $200 billion
• Microsoft: $190 billion

Big spending can be a flex, sure. But it also raises the obvious investor question: how long until all this AI capex starts showing up in profits, not just PowerPoints?

Why you should care

This isn’t just a vibes story. When hedge funds rotate out of tech this aggressively, it can drag on the whole sector’s momentum, especially after a huge run-up. If you own the big indexes or semiconductor ETFs, you’re not exactly sitting in an isolated bubble — this is the market’s favorite trade getting a reality check.

Big picture: tech isn’t broken, but it may be entering the annoying part of the cycle where good news needs to be very good news to keep the party going.