Global hedge funds have cut long and short positions by more than 8% of total gross exposure since June, the largest unwind since at least 2017 in Morgan Stanley prime brokerage data, pushing gross leverage for US long/short funds down to the 10th percentile over the past year. At the same time, equity flows showed a rotation out of AI leaders rather than broad market selling: tech suffered $11B in outflows led by $5B from Nvidia and $3.6B from Alphabet, while the rest of the market took in $29.4B and buyers added $1.6B to Apple. That rotation lifted Apple to a $5.03 trillion market capitalization at the close, overtaking Nvidia at $4.94 trillion as the world’s most valuable company, while Regeneron rose more than 12% and Exxon Mobil and Chevron hit record highs.

Concerns over the returns on AI capital spending have erased roughly $5 trillion from the Nasdaq 100 since October 6 and left five of the Magnificent Seven stocks in double digit drawdowns from their highs, with Alphabet and Meta down more than 20% in bear market territory. Amazon slipped more than 1% on Friday after reporting a third quarter miss, $42.4B in trailing 12 month negative free cash flow, and a $220B capital expenditure plan for 2026, even as AWS revenue rose 39% to $46B. Chipmakers also retreated across the board, with AMD falling nearly 11%, Broadcom dropping 5%, and Nvidia losing 4%.