CalPERS is trimming its investments in major U.S. technology stocks and redirecting more capital toward private equity as investors grow increasingly cautious about AI valuations and the returns expected from heavy spending on artificial intelligence.
According to the Financial Times, the California Public Employees’ Retirement System, the world’s fifth-largest pension fund, reduced its exposure to leading technology companies amid mounting concerns that the AI investment boom may not deliver the returns needed to justify current valuations.
The pension fund oversees more than $600 billion in assets. An FT analysis of regulatory filings found that CalPERS cut its combined direct shareholdings in the Magnificent Seven companies by 26% during the first half of the year. The group consists of Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla.
The group’s market performance has varied this year. The Roundhill Magnificent Seven ETF (MGAS) has climbed 7% year to date, with Apple gaining 34% and Nvidia advancing 12%. Meta, Alphabet and Tesla have all posted losses over the same period.
At the same time, CalPERS is increasing its private equity exposure to diversify its portfolio and reduce dependence on a concentrated group of large publicly traded companies.
Deputy chief investment officer Anton Orlich told the Financial Times that public equity valuations appeared elevated. He added that the major technology companies could underperform other investment opportunities.
The move comes as concerns about AI infrastructure financing continue to weigh on the market. SpaceX, led by Elon Musk, raised $40 billion in debt to purchase graphics processing units for AI workloads. Musk has warned that funding has become harder to obtain for companies that lack substantial revenue beyond AI data centers, raising the prospect of consolidation across the neocloud industry.
The pressure extended into Monday’s premarket session, when shares of neocloud providers including CoreWeave, Cipher Digital and IREN fell as investors reassessed the sector’s outlook.
