Chinese Hedge Funds Warn of AI ‘Super Bubble’ as They Cut Nvidia and Hyperscalers
Two Chinese hedge funds, Wealspring Asset (~$1.4B) and Shanghai Banxia (~$294M), warn that the AI trade may be a “super bubble” nearing collapse. Wealspring says conditions for an AI stock sell-off are already forming and could worsen sooner than investors expect. Banxia points to early cracks including slowing revenue growth at Anthropic.
Both firms are reducing exposure to the marquee AI beneficiaries: Nvidia and US hyperscalers—Microsoft, Amazon, Alphabet, and Meta. The reported shift is not necessarily away from AI completely, but toward the broader data-center ecosystem and supply-chain enablers that may be less headline-sensitive.
Industry data cited in the article shows AI-focused hedge funds’ average excess returns fell sharply in the first half of 2026. The timing of these calls follows painful July drawdowns, when Chinese funds heavily exposed to AI stocks suffered violent price swings. Managers responded by cutting AI positions or injecting proprietary capital to avoid forced liquidations at unfavorable levels.
The article also argues this “rotation” reflects real investment plumbing: AI capex depends on power systems, specialized construction, networking, liquid cooling, semiconductor packaging, advanced memory, and electrical grid infrastructure. However, neither fund disclosed the exact trade sizes or dollar amounts, leaving the scale of the AI trade unwind unclear.
Neutral
The article is mainly about equity positioning (Chinese hedge funds reducing exposure to Nvidia and US hyperscalers) rather than crypto directly. That said, it can still affect crypto via risk sentiment and liquidity. A “super bubble” narrative plus July-style drawdowns can tighten risk appetite and raise volatility, which historically tends to pressure higher-beta assets in the short term (including crypto) as traders de-risk.
However, the described rotation is also toward the broader data-center/supply-chain ecosystem, not a blanket exit from AI. If markets interpret this as “reallocation within tech” instead of a full tech crash, the impact on crypto could be limited and potentially mean-reverting.
In the short term, traders may anticipate a tech risk-off impulse (bearish for risk assets). In the longer term, if the sell-off is orderly and investment fundamentals in infrastructure remain intact, crypto may see only transient pressure. Compared with past high-multiple tech rotations (when AI/semis narratives overheated), the usual pattern is: initial volatility, then consolidation as portfolios rebalance—suggesting a neutral-to-slightly bearish risk tone rather than a clear one-way move.