Calpers cuts big tech exposure as AI valuation concerns reshape portfolio strategy
California's public pension giant is trimming direct holdings in the biggest U.S. technology stocks as scrutiny of elevated valuations and AI spending intensifies. The shift comes as the fund broadens its private equity exposure and as weaker sentiment hits neocloud shares tied to data center demand.
Highlights
- Calpers cut its holdings in Magnificent Seven tech stocks by 26% in H1 2024, citing expensive public equity valuations and shifting to private equity.
- Despite the Roundhill Magnificent Seven ETF (MGAS) rising 7% year-to-date, performance diverged—Apple gained 34% and Nvidia 12%, while Meta, Alphabet, and Tesla declined.
- Elon Musk warned that funding for neocloud companies outside AI data centers is drying up, with pre-market selling hitting CoreWeave, Cipher Digital, and IREN.
Portfolio shift reflects valuation concerns
As reported by CoinDesk, citing the Financial Times, Calpers reduced the combined number of shares it directly held in the so-called Magnificent Seven stocks by 26% in the first half, based on the newspaper's calculations from regulatory filings. The group includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla.Calpers manages more than $600 billion and is increasing its exposure to private equity as it seeks to diversify across a wider range of companies. Deputy chief investment officer Anton Orlich told the Financial Times that public equity valuations looked expensive and that the technology giants could underperform other investments.
Pressure builds across AI-linked equities
The move adds to broader investor concerns over whether the returns from heavy AI-related spending can justify current market prices. While the Roundhill Magnificent Seven ETF, MGAS, is up 7% year to date, performance within the group is uneven, with Apple up 34% and Nvidia up 12%, while Meta, Alphabet and Tesla are all down for the year.Those concerns are also weighing on neocloud companies. Elon Musk recently warned that financing has largely dried up for companies without substantial revenue outside AI data centers and said consolidation among neocloud providers is likely, while Monday pre-market trading shows selling pressure in names including CoreWeave, Cipher Digital and IREN.
In our earlier article on the AI-linked tech selloff, we explained how hotter inflation data revived rate-hike expectations and pushed Nasdaq futures and major technology names lower. We also highlighted that investors were reassessing the cost of financing large-scale AI infrastructure, with pressure spilling into companies such as CoreWeave and Oracle as bond yields rose and risk appetite weakened.
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