CalPERS Pullback Adds to Market Anxiety as AI Jitters Hit Neocloud Firms

CalPERS is reducing its holdings in major U.S. technology stocks and shifting more investments into private equity as concerns over stretched valuations and the profitability of the artificial intelligence boom intensify.

The California Public Employees’ Retirement System, the world’s fifth-largest pension fund, is pulling back from some of the biggest names in technology as investors question whether the industry’s massive AI investments will generate sufficient returns, the Financial Times reported.

The fund manages more than $600 billion in assets. An analysis of regulatory filings by the FT found that CalPERS reduced its combined direct shareholdings in the Magnificent Seven companies by 26% during the first six months of the year. The group includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla.

The Magnificent Seven have delivered mixed results this year. The Roundhill Magnificent Seven ETF (MGAS) is up 7% year to date, with Apple posting a 34% gain and Nvidia rising 12%. Meta, Alphabet and Tesla, by contrast, have fallen over the same period.

To broaden its investment exposure, CalPERS is increasing its allocation to private equity, aiming to spread capital across more companies rather than remain heavily dependent on a handful of market-leading technology firms.

Deputy chief investment officer Anton Orlich told the FT that public equity valuations appeared costly and that large technology companies could perform worse than other investment categories.

The portfolio adjustment comes as financing concerns deepen across the AI infrastructure market. SpaceX, led by Elon Musk, raised $40 billion in debt to purchase graphics processing units for AI computing. Musk has warned that companies generating little revenue outside AI data centers are finding it increasingly difficult to obtain financing, potentially leading to consolidation among neocloud providers.

The strain was visible in Monday’s premarket session, as shares of CoreWeave, Cipher Digital and IREN came under renewed selling pressure.