Two of China’s better-known hedge funds are warning that the frenzy around artificial intelligence stocks may have gone too far and that a painful correction could be closer than most investors think.
Wealspring Asset Management, which runs around $1.4 billion, told its investors in a recent mid-year letter that the AI rally has turned into what it called a “super bubble.” The firm’s founder, Yang Dong, argued that market enthusiasm has drifted well away from the actual earnings power of the companies driving the rally, and suggested some of the most expensive AI stocks could see dramatic falls if the numbers don’t eventually back up the hype. Wealspring’s letter isn’t publicly available, but media reports citing its contents have drawn considerable attention.
Shanghai-based Banxia Investment Management echoed the concern. In its own communication to investors, the fund argued there are already signs that the AI trade is running into trouble. It pointed specifically to slowing revenue growth at AI startup Anthropic as evidence that the commercial reality of AI is struggling to keep up with the enormous amounts of capital flooding the sector.
To be clear, neither fund is dismissing AI as a technology. Both acknowledged it could be genuinely transformative over the long run. Their concern is narrower: that stock prices have already priced in years of future growth, leaving investors dangerously exposed if earnings or adoption figures disappoint.
The warnings land at a peculiar moment. AI remains arguably the hottest investment story in the world, with semiconductor companies, cloud providers and infrastructure firms continuing to attract enormous capital as big tech doubles down on AI spending. The stocks have reflected that excitement.
But the debate about whether this is a genuine technology revolution or a classic case of investor optimism running ahead of reality is clearly not going away — and these two funds are making sure of it.
