CalPERS is scaling back its positions in major U.S. technology stocks while expanding its private equity investments, reflecting growing investor unease about lofty tech valuations and the potential returns from the AI spending boom.

The California Public Employees’ Retirement System, which ranks as the world’s fifth-largest pension fund, is reducing its exposure to leading technology companies as questions emerge over whether the rapid expansion of artificial intelligence infrastructure can justify current market prices, the Financial Times reported.

According to the newspaper’s analysis of regulatory filings, CalPERS cut its combined direct holdings in the Magnificent Seven stocks by 26% in the first half of the year. The pension fund manages more than $600 billion in assets. Its reduced holdings cover Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla.

The performance of these companies has diverged in 2026. The Roundhill Magnificent Seven ETF (MGAS) has risen 7% year to date, with Apple shares climbing 34% and Nvidia gaining 12%. Meta, Alphabet and Tesla have declined over the same period.

CalPERS is directing more capital into private equity as part of a broader effort to diversify its investments and limit its reliance on a small number of dominant stock-market companies.

Deputy chief investment officer Anton Orlich told the Financial Times that valuations in public equity markets looked expensive. He also indicated that major technology stocks might deliver weaker returns than alternative investments.

Meanwhile, concerns about the funding of AI infrastructure businesses are adding to market pressure. Elon Musk’s SpaceX raised $40 billion in debt to acquire GPUs for AI computing. Musk has also warned that companies without significant revenue streams outside AI data centers are facing a sharp reduction in available financing, potentially accelerating consolidation among neocloud providers.

The concerns continued to affect the sector on Monday, with CoreWeave, Cipher Digital and IREN shares falling in premarket trading as investors reassessed the outlook for AI-focused computing companies.