California’s $640 billion pension fund, Calpers, is reducing its stake in major U.S. technology companies while increasing its exposure to private equity, reflecting growing caution over the durability of the recent AI-driven market surge.

Anton Orlich, Calpers’ deputy chief investment officer, said the fund has traded a concentrated holding in seven leading tech firms—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla—for a more diversified portfolio across several hundred companies. This rebalancing aims to reduce equity risk by lowering concentration in a handful of stocks.

Data based on Calpers’ regulatory filings indicate that in the first half of 2026, the fund cut its direct ownership of shares in these seven tech giants by 26 percent. This move comes amid widespread investor anxiety about whether the rapid gains powered by investments in artificial intelligence, data centers, and semiconductors are sustainable.

The retreat by Calpers coincides with recent market volatility triggered by Meta’s announcement that it plans to invest “hundreds of billions of dollars” on AI development over the coming years. The disclosure spurred a significant sell-off in tech stocks, pulling the Nasdaq 100 index down 7.7 percent from its peak earlier in October.

The shift also takes place against the backdrop of a prolonged bull market in U.S. equities led by technology companies. Over the three years ending in March 2026, the S&P 500 total return, including dividends, rose approximately 65 percent. In contrast, a private equity index compiled by Cambridge Associates delivered a 24 percent gain in the same period—highlighting the relative underperformance of private equity.

Orlich noted that public equity valuations remain elevated and heavily concentrated in a small group of companies. By contrast, he described private equity holdings as more attractively priced, presenting an “arbitrage” opportunity that could provide Calpers with downside protection should public markets falter.

However, this strategy has drawn some skepticism. Private equity funds have faced challenges in exiting investments through sales or public listings recently, and the high valuations of AI-focused start-ups, such as OpenAI and Anthropic, raise questions about the potential returns from venture capital and growth equity sectors.

Roger Vincent, founder of Summation Capital and former head of private equity at Cornell University’s endowment, expressed doubt about the merits of increasing allocations to venture and growth equity at the expense of public stocks. He questioned whether this shift aligns with long-term investor interests given the uncertain outlook for private market returns.

As Calpers recalibrates its portfolio amid evolving market conditions, its approach underscores the ongoing debate among institutional investors over balancing concentration risk, valuation levels, and exposure to emerging technologies within both public and private markets.