The global AI trade has been experiencing a setback this year, with shares of AI chipmakers falling sharply.
A new report released by Hazeltree found that more hedge funds in July positioned themselves to benefit from betting against AI-related stocks.
Hazeltree, a cloud-based treasury, liquidity, and portfolio finance solutions provider, reported on Wednesday that hedge funds essentially increased short bets against AI and semiconductor stocks. This includes NVIDIA stocks. This pattern occurred increasingly in July 2026 believed to be driven by high valuation concerns.
Data showed a pivot in financial strategy on AI stocks, where investors reduced long exposure to tech infrastructure and rotated capital into other sectors.
On Monday, Forbes reported that Nvidia came under particular pressure during the July–August 2026 sell-off in AI chip stocks. Nvidia faced hits ranging from a single-day loss of $130 billion to $300 billion in market value during the worst-hit sessions, bringing the stock down roughly 15 per cent to 27 per cent from its 52-week peak.
Additionally, individual daily drops erased between $130 billion (a 2.5 per cent to 2.8 per cent dip amid financing scrutiny) and nearly $300 billion during a broader market panic.
Hedge Funds Betting on AI Chipmaker Price Falls
According to Reuters, hedge funds increased short positions and bet on a price fall in AI chipmaker firms, Super Micro Computer, CoreWeave, and Nebius Group.
The Hazeltree report also noted that three companies–Super Micro Computer, CoreWeave, and Nebius Group were among the top 10 most shorted stocks in July this year across the firm’s hedge fund client base. The client base has been reported to have over 700 funds.
In contrast, these three companies were in the top 10 in June; however, the short positioning began to grow soon after.
Following SpaceX's IPO in June, U.S. semiconductor stocks fell about 20 per cent from their June peak, amid a broader sell-off in AI-related stocks.
20 per cent mark refers specifically to the Philadelphia Semiconductor Index (SOX), which slid into a bear market amid heavy profit-taking and intense global tech sector volatility. For instance, South Korea’s tech-heavy Kospi index dropped by 22 per cent according to Reuters. Both indexes reported their biggest monthly fall since 2008, the news report added.
Nvidia, CoreWeave Market Value Trends in July
Hazeltree noted that while hedge funds increased their short bets against the AI chipmaker, the aggregate positioning remained complex. Despite the rise in bearish sentiment, these funds collectively held more long positions in Nvidia, maintaining exposure in anticipation of a potential price recovery. This nuanced shift in Nvidia stock performance highlights a tactical hedge rather than a complete exit from the AI trade.
On Tuesday, CoreWeave saw a significant rise in shares as the firm's performance outcome was better than expected, beating its second-quarter projections. However, as many investors bet against CoreWeave, the rising price could force those investors to buy shares to limit their losses, pushing the price even higher in a “short squeeze.”
According to Reuters, the broader market sentiment suggests that Wall Street is prioritising companies that demonstrate clear monetisation signs. Hazeltree stated that investors are "trimming borrowed risk" and redeploying capital into AI infrastructure winners that show tangible financial results, rather than abandoning the sector entirely.
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