The $640 billion California pension giant is cutting back its positions in major American technology companies while raising its allocation to private equity. The move underscores a growing market worry: the artificial intelligence rally that has repeatedly pushed Wall Street to record highs is losing momentum.
Anton Orlich, deputy chief investment officer of the California Public Employees' Retirement System (CalPERS), said in an interview: "We are spreading a large exposure concentrated in seven giants across hundreds of companies. We are diversifying our equity risk and reducing position concentration."
Based on calculations from the fund's regulatory filings, CalPERS, the largest public employee retirement fund in the United States, adjusted its portfolio in the first half of 2026, cutting its total directly held position in the "Magnificent Seven" (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla) by 26%. Orlich's remarks came against this backdrop.
CalPERS' rebalancing reflects mounting anxiety among many investors over whether the tech stock bull market, driven by massive capital spending on data centers and chips under the AI boom, can be sustained. Meta disclosed this week that it plans to spend "hundreds of billions of dollars" over the coming years to carry out its artificial intelligence development plans, a disclosure that triggered a large-scale tech sell-off on Thursday, with the Nasdaq 100 index now down 7.7% from its record high set in early October.
CalPERS' repositioning comes after US stocks have enjoyed several years of a bull market led by technology giants. Private equity funds, once an important source of institutional returns, are now finding it difficult to sell or list the companies they hold. In the three years through March 2026, the blue-chip S&P 500 delivered a total return of about 65% including dividends, while the Cambridge Associates US private equity index returned only 24% over the same period.
Orlich said: "Public market equity valuations are at highs, and the market is highly concentrated in a handful of stocks. I think there is a possibility that these stocks will underperform the broader market in the future." He said valuations of unlisted private companies are more attractive than those of listed companies, describing it as a kind of "arbitrage" opportunity that could help CalPERS hedge risk if public markets eventually enter a down cycle.
Orlich noted that since a comprehensive overhaul of its investment strategy in 2022, venture capital and high-growth mature unlisted companies have accounted for a "disproportionately high" share of CalPERS' new investment commitments. Although the IPO market has produced only a few blockbuster listings, Orlich said the fund can exit many of its venture capital and growth equity holdings not through listings but by selling to strategic acquirers.
Even so, analysts still question the potential long-term risks of CalPERS increasing its private equity exposure. In particular, with valuations of AI startups such as OpenAI and Anthropic soaring, the market is beginning to worry about whether returns in the venture capital and growth equity segment can be sustained.
Roge Vincent, founder of Summation Capital and former head of private equity at Cornell University's endowment, is skeptical of the logic of shifting from publicly traded stocks into venture capital and growth equity assets whose valuations have already surged sharply. He said: "Right now, it is almost common knowledge that artificial intelligence will completely transform society. But actually making money during a conceptual hype cycle is the hardest thing in the world."
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