Chinese Hedge Funds Start Trimming AI Holdings After Booking Profits
N.R. Finch
Several of China's best-performing AI-stock hedge funds are actively cutting exposure, warning investors in recent letters that the rally may be approaching bubble territory.
How much did they make — and who is selling first?
Yongying Capital's Growth Strategy No. 3 fund returned 164% year-to-date through May 31, and has trimmed holdings in optical-communications and advanced-packaging stocks.
Hundun Investment's Yueyang G1 fund rose roughly one-third in the first five months; its May letter confirmed partial sales of AI names.
This means → The funds that profited most from this year's AI trade are not just calling a top — they are already selling.
What warning signals are they watching?
Zhuishi Asset Management's Zhang Xiuqi flagged three indicators: slowing AI-model revenue growth, falling compute-rental prices, and cloud-company capex cuts.
Hundun Investment listed three preconditions for a larger exit: a societal backlash against AI, a plateau in model-capability improvement, and an easing of supply-chain bottlenecks.
In plain terms = One set of eyes is on "is the money slowing down," the other on "is the technology stalling" — trouble on either front triggers a faster retreat.
What does the "progress bar" at 60 mean?
Hundun Investment raised its internal AI-hardware "progress bar" — a proprietary gauge of how far this investment cycle has advanced, scored out of 100 — from 30 in February to 60 now.
The firm wrote: "Of course, we won't wait until 90 or 100 to start selling."
This means → By this framework the AI hardware cycle is past the halfway mark. The safety margin for bulls is narrowing — selling is not about waiting for confirmation but about executing in stages ahead of time.
What are the bears saying?
Shanghai Banxia Investment cited Anthropic's slowing revenue momentum in its May macro-fund letter, calling it evidence that "triggers for an AI bubble burst have already appeared."
Banxia's logic chain: rising token costs → big-tech firms cut procurement + rivals erode Anthropic's share among developers → demand squeezed on two fronts.
Dan Bin, a prominent fund manager overseeing more than RMB 10 billion, cautioned: "You can exploit the frenzy, but never become the frenzy itself." He flagged 2027 as a potential inflection point for AI capex.
Have the bulls fully retreated?
No. Yongying Capital sees "ample growth potential" in leading overseas memory-chip makers; Hundun Investment insists the rally is "driven by real earnings."
Zhuishi Asset Management argues this boom has solid industry fundamentals and differs fundamentally from the 2000 dot-com bubble.
This reflects a nuanced consensus: these funds do not think AI is a false narrative, but they believe prices have run ahead of fundamentals — trimming is risk management, not a bearish pivot.
Content is for reference only, not financial advice.