Hedge funds increased short positions in major technology stocks, including Amazon, Apple, Nvidia and Meta, during October, according to Hazeltree's Data Insights Crowding Report. Apple, Amazon, Meta and Microsoft all recorded their lowest long-to-short ratios of 2026 as concerns over AI valuations and financing triggered a shift in positioning.

Apple's long-to-short ratio fell to 0.65x, marking its third consecutive month below parity. Alphabet remained slightly above parity at 1.02x. The report analyses anonymised positioning data covering around 16,000 securities held by more than 700 funds.

Semiconductor stocks faced the strongest selling pressure. The PHLX Semiconductor Sector Index declined roughly 16% in October, while the share of index constituents with net long positioning fell to 70%.

Advanced Micro Devices (AMD) shifted from long-biased to short-biased positioning. Its long-to-short ratio dropped from 1.18x to 0.94x, while net long exposure declined from 77.9% to 44.4%. Nvidia remained the most crowded semiconductor long, followed by Broadcom and Applied Materials.

Data Insights Managing Director Tim Smith flagged growing stress around CoreWeave. The company's 2032 bonds were yielding close to 15%, with default insurance costs widening. Smith said the levels were approaching those typically associated with distressed debt. CoreWeave's long-to-short ratio declined from 0.60x to 0.53x, while its shares fell approximately 37% during October.

Morgan Stanley's prime brokerage desk said hedge funds had turned underweight the AI trade for the first time since early 2023. Funds also shifted towards defensive sectors.

Citi downgraded US and global technology stocks to neutral, citing rising credit spreads and weaker earnings revisions.

Key takeaway: October saw a significant rotation away from major technology and AI stocks as hedge funds reassessed valuations, financing risks and credit conditions, while defensive and non-technology sectors gained favour.