As of February 25, 2026, hedge funds are reversing weeks of aggressive selling in the technology sector. Prime brokerage data from JPMorgan and Goldman Sachs indicate that managers are creeping back into large-cap tech and “battered” software names, signaling that the forced liquidation phase has likely peaked.

The early 2026 selloff was driven by an existential “AI disruption” narrative. Investors shifted from debating growth rates to analyzing survival curves, fearing that AI could commoditize legacy software moats. This triggered a 20%+ decline in key software indices.

However, the tide turned this week as the “marginal seller” vanished. Hedge funds are now executing a tactical re-entry, driven by re-risking mechanical risk controls (stop-losses, VaR limits, etc.) and a return to pair trades buying AI adapters and selling AI casualties

This is not to suggest that managers are returning to a broad “AI beta” trade. Instead, the focus seems to be on Mega-cap tech and selective software companies where the market may have over-discounted the AI threat. While global equity sentiment remains cautious due to policy uncertainty, the return to tech suggests that for the first time in 2026, the risk-reward balance in the sector has finally normalized.

End Notes

Source: https://www.hedgeco.net/news/02/2026/hedge-funds-are-buying-tech-stocks-again-after-weeks-of-selling-what-changed-what-didnt-and-why-it-matters-now.html