The smart money's moves may signal where markets head next
Pension funds, endowments, and hedge funds rushed into semiconductor and AI infrastructure stocks in the first quarter, according to a Reuters review of 13-F filings from roughly 6,600 institutional investors with the SEC.
That positioning paid off as the rally extended into the second quarter.
Nearly 5,000 of those investors reported buying one or more of 17 semiconductor firms tracked by Reuters.
Micron, whose stock soared 154 percent year to date on booming memory chip demand, attracted 2,440 institutional buyers, including Rockefeller Capital Management and Schroder Investment Management.
Intel, up 195 percent year to date, drew new positions from Tiger Global Management, Neuberger Berman and MetLife Asset Management.
Northern Trust initiated positions across Intel, Micron, Seagate Technology and Western Digital, Reuters reported, with those last two stocks up 188 percent and 179 percent, respectively.
AI infrastructure was equally sought after.
More than 4,000 institutions added to or initiated positions in companies including Oracle, Arista Networks and Vertiv, while only 164 reported selling during the quarter, according to Reuters.
Utilities saw nearly 3,800 institutions add new exposure, with no institutions reducing or liquidating utility holdings during the period.
The “Magnificent Seven” were a different story.
Reuters reported that sellers narrowly outnumbered buyers for Meta and Microsoft as uncertainty persisted over whether those companies could sustain their pace of AI spending.
Pershing Square's Bill Ackman opened a new position in Microsoft after its stock dropped, selling his long-held stake in Google parent Alphabet to fund it.
Mubadala Investment Company initiated a US$9.9m position in Palantir and also took a stake in Shopify.
Both are among several SaaS names hit by fears that AI will erode their business models.
Overall, institutions were more inclined to sell than buy across 20 US-listed SaaS stocks, with 397 liquidating one or more positions, according to Reuters.
Institutional enthusiasm in public markets stands in contrast to growing tensions in venture capital, where high valuations are making exits increasingly rare, InstitutionalInvestor.com reported.
AI-related companies now account for half of the entire VC market's valuation, leaving the rest “fighting for capital and staring at expected returns well below those of the past,” according to PitchBook's first quarter report, cited by the same outlet.
While 15 VC-backed companies went public in the first quarter, PitchBook said the annualized pace “remains well short of what is needed to meaningfully reduce the years-long backlog of companies awaiting liquidity.”
SpaceX is targeting a US$1.75tn valuation in a June IPO that would be the largest on record; potential listings from OpenAI and Anthropic could push all three companies to a combined US$3tn in value.
PitchBook warned that if those deals absorb all available capital, “a broader recovery could slip into 2027, further straining an already difficult liquidity environment.”
Vintage 2019 and 2020 funds are showing distributions “among the lowest of any vintage at that stage since before the global financial crisis,” InstitutionalInvestor.com reported.
Funds that miss early distributions rarely recover the shortfall later.
AI premium compresses returns
Series A AI companies commanded an 84 percent valuation premium over non-AI peers in the first quarter; at Series B, the premium reached 55 percent, up from 39 percent in 2025.
“For investors competing for AI deals, rising entry prices compress the return multiple at exit,” PitchBook said.
Jason Greenberg, executive chair of technology, media and telecom banking at Jefferies, told CNBC that institutional investors “simply can't afford to be underweight AI,” calling the trade “too big to ignore and too painful to fight.”
He argued AI is no longer competing for the IT budget — it is competing for the labour budget.
He said the IPO pipeline is “as great as it's ever been” after four lean years, but cautioned that “value doesn't” yet not matter in the current environment.
Alpha Partners founder Steve Brotman told Institutional Investor the market is in “an AI supercycle” comparable to the industrial revolution, predicting “every company will be an AI company.”
About 70 percent of his firm's third fund is already invested in AI-related companies.
