Top AI Hedge Funds Begin Selling as Market Rotation Intensifies

Shanghai Everlead Capital, which saw a 164 percent gain this year, has started selling off its major AI hardware positions. The firm is trimming stocks related to chip packaging and optical components after these assets experienced rapid vertical growth. They are joined by Hunjin Capital, which is also rotating out of crowded memory chip stocks and moving into more traditional, cheaper sectors. These moves suggest that major players are booking profits rather than betting on an immediate crash.

Data indicates a wider rotation across the AI sector. While compute and hardware stocks have cooled off after a strong run, money is now shifting into software and applications that previously lagged behind. Power and infrastructure stocks, which had become closely linked to the AI trade, are also seeing their momentum stall as they move in tandem with chip sector performance.

The future of the market depends on big tech spending through 2027. Companies are expected to spend over 600 billion dollars on AI infrastructure in 2026, with estimates pointing toward one trillion dollars by 2027. If this spending continues, the current sell off will likely be seen as simple profit taking.

However, risks remain. Cheaper AI models from China are creating price competition that could eventually lower profit margins for tech giants. If these lower costs lead companies to reduce their capital expenditure, the current market rotation could turn into a broader decline. Investors are keeping a close watch on 2027 spending forecasts to determine if this is just a cycle shift or the start of a deeper bubble burst.