Leading asset managers are positioning for a sharp sell-off in US technology stocks, on concerns over “insane” valuations and a possible bubble forming in parts of the artificial intelligence sector.
A number of investors told the Financial Times that they were protecting their portfolios either by reducing their positions or by using derivatives that profit from falls in share prices.
“Whether there are excesses . . . in the equity market on AI is no longer questionable, but to figure out which exact companies will be the losers and when this reckoning will happen is difficult,” said Vincent Mortier, chief investment officer of Amundi, Europe’s largest fund manager with €2.3tn in assets.
Amundi has been buying protection through derivatives across many of its portfolios, which Mortier said was an alternative to “selling the market outright or some of its constituents”.
The move comes amid growing concerns among some commentators over a possible bubble in the booming US tech sector, as firms rush to invest in AI infrastructure and valuations are pushed higher. Some are drawing a parallel with the dotcom boom-and-bust a quarter of a century ago.
An index of the so-called Magnificent Seven tech stocks that dominate the US market — Nvidia, Meta, Tesla, Apple, Microsoft, Amazon and Alphabet — jumped around 21 per cent last year. Chip giant Nvidia now stands on 46 times earnings, despite falling back from its record high reached in October, while Apple is on 37 times.
The £1.7bn Blue Whale Growth fund, backed by Hargreaves Lansdown co-founder Peter Hargreaves, sold out of both Microsoft and Meta during the second quarter of last year.
“It was a significant decision, especially because we’d owned Microsoft since the fund’s launch more than eight years ago,” said Stephen Yiu, Blue Whale’s chief investment officer.
“Even though we don’t think there’s a bubble, we are concerned about the return on investment in some cases, while some of the valuations are insane — especially in private markets. Of the Magnificent Seven, we now only hold Nvidia,” he said.
The IMF, the Bank for International Settlements, the Bank of England and the European Central Bank are among those to issue warnings about valuations.
However, a recent survey by Bank of America found global asset managers’ cash positions had fallen to a record low, in a sign of investor bullishness, even though fears of an AI bubble remain the biggest market risk. Wall Street banks, meanwhile, are expecting another year of double-digit gains for US stocks this year.
Some fund managers have decided to sell out of the Magnificent Seven completely.
“Though we had less exposure to a few Mag 7 names throughout 2025, we exited our remaining positions by early November because the risks of an AI bubble blow-up are growing, in our view,” said Rajiv Jain, chair and chief investment officer of GQG Partners, which runs more than $166bn in assets, in a recent interview.
“AI’s massive cash burn remains elevated with very little profitability in sight. AI revenue base is under $25bn. Startups can’t keep engines running for large public cloud players forever,” he said.
He added that warning signs, including “aggressive” capital expenditure and accounting, were “becoming more widespread”, meaning: “This looks like the dotcom [boom] on steroids.”
Maya Bhandari, Emea chief investment officer of multi-asset at Neuberger Berman, which oversees $558bn, said the firm continues to “diversify away from US tech and AI, and towards other regions like China and Asian emerging markets that offer access to AI at a lower cost”. It is retaining US AI exposure while adding to positions in countries such as Korea.
However, others brushed off such concerns, believing the sector’s fundamentals remained strong.
Unlike the dotcom bubble, “today’s AI leaders are highly profitable, and much of the valuation expansion reflects rising return on equity,” said Tim Murray, capital markets strategist in the multi-asset division at T Rowe Price.
Debt levels remained “modest” and credit markets showed “no signs of stress”, he added. “Against this backdrop, T Rowe Price’s asset allocation committee is not advocating selling down AI exposure or taking aggressive derivative hedges.”
However, while many believe further gains can be made, they warn these could be accompanied by market volatility.
“We don’t believe that we are in a bubble,” said Helen Jewell, international chief investment officer for fundamental equities at BlackRock, “but investors should prepare for a bumpy ride in 2026.”