Chinese hedge funds that gained heavily on AI-linked stocks are beginning to reduce exposure, citing concerns the rally may be unsustainable. Shanghai Everlead Capital told investors in its Growth Strategy No 3 Fund, which returned 164% this year through May 31, that it trimmed positions in optical communications and advanced packaging companies. Hunjin Capital’s Yueyang G1 fund, up by a third in the first five months of the year, sold some AI stocks and identified specific triggers for a broader exit. Shenzhen Oriental Harbor Investment Management Co’s Dan Bin wrote that “you can take advantage of the frenzy but never become the frenzy,” and told investors 2027 may be when AI capital expenditure reaches an inflection point. Hunjin Capital flagged potential triggers including social backlash against AI, a plateau in model improvement, and a loosening supply chain. Shanghai Chaser Asset Management Co’s Zhang Xiuqi is watching for slowing AI model revenue growth, falling compute-leasing prices, and declining cloud-company capital spending. The Philadelphia Semiconductor Index has soared almost 80% this year alone.