Concerns over a potential AI-driven market bubble are prompting some prominent investment funds to reduce their stakes in major technology companies, even as others remain confident in continued growth. The divergence in strategy reflects deep uncertainty about the sustainability of soaring valuations in the sector.
According to a report by the Financial Times, several funds have begun repositioning their portfolios to guard against a sharp sell-off. The moves come as billions of dollars continue to flow into AI ventures that have yet to demonstrate consistent profitability, driving valuations to unprecedented levels.
Vincent Mortier, chief investment officer at Amundi, told the FT that while it is clear there are excesses in the AI equity market, pinpointing which companies will suffer and when a reckoning might occur remains difficult.
One notable example is Blue Whale Growth, which sold its positions in Microsoft and Meta during the second quarter of last year. Stephen Yiu, the fund's chief investment officer, expressed concern about the return on investment in some cases, describing certain valuations as "insane," particularly in private markets.
Rajiv Jain, chair of GQG Partners, highlighted the massive cash burn in AI with little profitability in sight. His fund exited all holdings in the so-called Magnificent Seven—Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft, and Nvidia—by early November, citing growing risks of an AI bubble blow-up.
Despite these cautionary moves, other investors see no imminent collapse. Helen Jewell, chief investment officer at BlackRock, told the FT that she does not believe the market is in a bubble, though she advised investors to brace for volatility in 2026.
Wall Street's Optimistic Outlook
Banks and financial institutions remain largely bullish on future growth. Wall Street has projected double-digit gains for the coming year, building on a 92 percent surge in the S&P 500 since October 2022, which has delivered three consecutive years of strong returns.
JPMorgan's Dubravko Lakos-Bujas wrote in a memo that 2026 should be another strong year for AI stocks, with capital expenditure likely to exceed expectations.
However, not all share that enthusiasm. Ray Dalio, founder of Bridgewater Associates, warned in a 2025 retrospective that the tech market is now in the early stages of a bubble. His caution adds to a growing chorus of voices questioning how long the AI hype can be sustained.
Gene Goldman, chief investment officer at Cetera Financial Group, told Bloomberg that while a bubble might eventually burst, it typically crashes during a bear market, which he does not foresee in the near term.
The split among investors underscores the broader uncertainty surrounding AI's long-term profitability. As some funds retreat, others are doubling down, creating a complex landscape for market participants navigating the next phase of the technology boom.
