Chinese hedge funds that generated substantial returns from artificial intelligence equities earlier this year are beginning to reduce their positions in the sector.
The move marks a notable shift in sentiment among managers who have been key beneficiaries of the AI investment boom, as they now cite heightened caution regarding potential valuation risks.
The reduction in exposure comes as these funds alert investors to a more defensive posture, monitoring for signs of a broader market correction.
This tactical retreat suggests that some capital is taking profits after a strong run, rather than maintaining aggressive long positions in technology and semiconductor names.
The development aligns with earlier warnings from two Chinese hedge funds that described the current AI market environment as a 'superbubble' ready to burst.
Those warnings highlighted concerns that valuations had detached from fundamental earnings growth, creating vulnerability to a sharp reversal.