In a notable shift on Wall Street, some of the largest U.S. hedge funds have reduced their holdings in the so-called “Magnificent Seven” stocks, including Nvidia (NVDA.O), Amazon (AMZN.O), Alphabet (GOOGL.O), and Meta (META.O), during the third quarter of 2025. At the same time, funds diversified into sectors such as application software, e-commerce, and digital payments, according to regulatory filings released on Friday.

Hedge Funds Adjust Portfolios After Big Tech AI Boom

During Q2 2025, hedge funds were highly bullish on Big Tech, fueled by a surge in artificial intelligence-driven valuations. However, the latest filings reveal that several top funds are now trimming exposure to these high-profile companies as valuations moderate.

Despite this recalibration, the U.S. stock market performed strongly during the third quarter. The S&P 500 rose nearly 8%, while the Nasdaq 100 gained approximately 9%, reflecting continued investor confidence in technology-driven growth. Bonds also saw modest gains amid expectations of monetary easing, pushing 10-year yields down by roughly seven basis points.

Bridgewater and Discovery Capital Lead Sector Shifts

Bridgewater Associates notably cut its stake in Nvidia by nearly two-thirds to 2.5 million shares and reduced its Alphabet holdings by more than 50% to 2.65 million shares. The fund simultaneously increased its exposure to sectors such as application software and payments, acquiring additional shares in companies like Adobe (ADBE.O), Dynatrace (DT.N), and Etsy (ETSY.N).

Meanwhile, Discovery Capital, founded by Rob Citrone, initiated new positions in companies like Alphabet, steelmaker Cleveland-Cliffs (CLF.N), and health insurers Cigna (CI.N) and Elevance Health (ELV.N). These moves signal a strategic pivot towards a more diversified portfolio encompassing traditional industries and growth-oriented tech.

Other Hedge Fund Moves: Meta, Apple, and Nvidia

Tiger Global and Lone Pine Capital significantly reduced stakes in Meta Platforms, by 62.6% and 34.8% respectively, while other prominent funds, including Coatue Management, scaled back positions in Nvidia. Notably, Dmitry Balyasny’s Balyasny Asset Management increased its stake in Apple, showing confidence in long-term tech fundamentals despite short-term volatility.

Hedge funds’ 13-F filings, released quarterly, offer a backward-looking snapshot of institutional investment strategies, shedding light on how often-secretive funds manage exposure to high-growth sectors.

Berkshire Hathaway’s Strategic Moves

Berkshire Hathaway also made headlines with a $4.3 billion stake in Alphabet, while further reducing its position in Apple. These moves highlight a trend among large institutional investors to rebalance portfolios amidst market volatility and changing tech valuations.

Market Implications and Investor Takeaways

The reduction of positions in AI-driven tech leaders suggests that hedge funds are cautious about overvalued Big Tech names, even as broader market indices climb. Simultaneously, increased allocations to sectors like software, payments, healthcare, and industrials point to a diversified strategy aimed at balancing growth potential with risk management.

For individual investors, these filings underscore the importance of monitoring hedge fund activity, understanding market sentiment, and considering sector diversification in response to fluctuating valuations in Big Tech.