ZeroHedge, a financial markets blog, reported on Monday, November 2, 2026, that hedge funds have moved underweight the broader artificial intelligence (AI) trade for the first time since early 2023. The post, citing Morgan Stanley (MS) Prime Brokerage data, stated that the combined summer and October de-grossing marks "the largest sustained stretch of L/S fund de-risking in over 15 years, as gross exposure never fully recovered between episodes." The data further highlighted that cumulative gross flow is down 8% from its June peak, representing the largest sustained de-grossing on record.
This shift in hedge fund sentiment comes as the broader market experiences volatility. While there is no direct recent coverage on AI investment trends from Gokhshtein Media, the technology sector remains a focus for many investors. Major tech stocks like Nvidia (NVDA) are down 4.2% today, trading at $204.64, and Meta (META) is down 1.5% at $614.99. The Nasdaq Composite index also saw a 2.9% decline today, closing at $25,437.
ZeroHedge's report suggests a notable change in how sophisticated investors are approaching the AI sector. The blog noted that the bulk of buying this past week came from short covering, which pushed US long/short net leverage up 5 points to 51%, even as gross exposure slipped 1 point to 207%. This indicates that while overall market exposure may remain high, the specific allocation to the AI trade has seen a significant reduction by hedge funds, potentially signaling caution or a re-evaluation of the sector's immediate prospects.
