Goldman Sachs Prime Services reported on May 22, 2026, that hedge fund clients are actively taking profits on semiconductor stocks even as tech markets sit near peak levels. Goldman’s data also shows these same clients maintain an optimistic overall view on the AI sector. It’s the difference between “AI is overhyped” and “AI stocks are overpriced right now.”

Record levels of tech sector exposure during periods of AI optimism have made some managers uncomfortable. A few funds have taken the contrarian approach, shorting companies they believe are making overhyped AI claims without the earnings to back them up.

Echoes of 2000 that nobody wants to hear

AllianceBernstein flagged what it called an AI-driven “FOMO arms race” back in October 2025, pointing to overinvestment from tech executives like Mark Zuckerberg as a sign of potential bubble dynamics.

The IMF and Bank of England both flagged risks of a market correction in late 2025 and early 2026 tied to AI-driven overvaluations. Their assessment was blunt: US stocks were nearing valuation levels not seen since the 2000 tech crash.

What this means for investors

AI tokens like ai16z and Virtuals Protocol already experienced sharp corrections in early 2025 as broader market volatility spilled over into speculative digital assets.

Heightened price-to-earnings ratios across the AI sector remain the single most important metric to track. When those ratios start compressing, either through earnings growth catching up or stock prices pulling back, the market will get its answer about which side of the hedge fund divide was correct.