Calpers, the $640 billion California Public Employees' Retirement System, is reducing its holdings in large US technology companies while adding to private equity assets, a move that highlights growing market concern that the AI-driven rally which powered US stocks to record highs may be running out of steam.
Anton Orlich, Calpers' deputy chief investment officer, told reporters: "We have spread our concentrated bet on seven giants across hundreds of companies. We are diversifying equity risk and reducing position concentration."
According to calculations based on the fund's filings, the largest public pension fund in the United States adjusted its portfolio in the first half of 2026, cutting its directly held stakes in the "Magnificent Seven" (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla) by 26% in total, around the time Orlich made those remarks.
Calpers' rebalancing reflects a widening worry among investors: can the technology stock rally, fueled by massive capital spending on data centers and chips amid the AI boom, be sustained?
Meta disclosed this week that it plans to spend hundreds of billions of dollars over the coming years on AI projects, news that triggered a sharp sell-off in technology shares on Thursday. The Nasdaq 100 index has fallen 7.7% from its record high set in early October.
Calpers' move comes against the backdrop of a multi-year US bull market led by technology giants. Private equity funds, once a key source of institutional returns, are now struggling to sell or list the companies in their portfolios.
In the three years to 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 just 24% over the same period.
Orlich said: "Public market equity valuations are already elevated, and returns are highly concentrated in a handful of stocks. I think there is a possibility these stocks underperform the broader market going forward."
He said valuations of unlisted companies are more attractive than those of listed peers, describing it as an "arbitrage opportunity" that could help Calpers hedge risk if public markets decline later.
Orlich noted that since a major investment strategy shift in 2022, venture capital and fast-growing unlisted companies have accounted for a relatively high share of Calpers' new capital commitments.
Although the IPO market can still support a small number of blockbuster listings, Orlich said many of Calpers' venture and growth equity holdings can exit by selling to strategic buyers.
Still, analysts have questioned the long-term risks of Calpers' increased allocation to private equity. Valuations of AI startups such as OpenAI and Anthropic have climbed steadily, raising concerns about whether returns in the venture capital and growth equity segment can be sustained.
Roger Vincent, founder of Summation Capital and former head of private equity at Cornell University's endowment, is skeptical of the logic of shifting from public stocks to venture and growth equity with soaring valuations. He said: "Right now, it may be clearer than ever that AI will fundamentally transform society. But actually making money in a hype cycle may be the hardest thing of all."
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