Hedge funds stuck to their convictions in 2025, but the crowding risk is showing sharp regional and sectoral divergence.
A new report from Hazeltree, analyzing data from over 600 asset managers, reveals a clear bifurcation: Funds remained heavily long on AI software winners while piling into short bets against legacy tech and hardware execution stories.
🐂 THE CROWDED LONGS:
- The AI Safety Play: Alphabet, Microsoft, and Meta remained the most crowded long positions, reflecting continued institutional faith in their ability to monetize generative AI.
- Europe: Capital flowed into Industrials, driven by secular trends in Defense and Energy spending.
🐻 THE CROWDED SHORTS:
- The “Strategy” Trade: Short interest persisted in MicroStrategy (MSTR), likely a hedge against its Bitcoin treasury premium, and IBM.
- The M&A Risk: Synopsys (SNPS) emerged as a top short target. Following its $35 billion acquisition of Ansys (completed July 2025), concerns over integration execution and a Q3 revenue miss have made it a consensus bearish bet.
- Financials: Wells Fargo, JPMorgan, and KeyCorp saw the heaviest short crowding in the banking sector, despite the broader rally.
🌏 REGIONAL SPLIT:
- North America: Focus on Software & Services.
- Asia: Focus on Industrials & Hardware, reflecting the region’s role as the “supply-chain backbone” of the AI build-out.
💡 ANALYST TAKEAWAY: The data suggests the “AI Trade” is maturing. Investors are no longer buying everything with a chip; they are actively shorting companies with complex integration hurdles (Synopsys) or unclear AI pivots (IBM), while doubling down on the hyperscalers with proven capex power.
👇 Portfolio Managers: Are you still long the “Mag 7,” or is the crowding risk now too high to ignore?