The leverage level among global hedge funds remains near the highs of recent years. JPMorgan warns: quarterly portfolio rebalancing could lead to stock sales of about $165 billion before the end of June.
Most of the attention is now on the technology sector. Too many investors are in similar trades there, especially in stocks related to AI.
Goldman Sachs and JPMorgan are both talking about the risks. Both banks point to one weak spot: if technical selling begins, the high level of borrowed funds could quickly intensify the decline.
Leverage Growth Is Concentrated Around the AI Sector
According to Goldman Sachs Prime Brokerage, hedge funds have been increasing leverage for over a year. In June 2025, total leverage reached about 294%. This is the highest in five years, reported Reuters.
Goldman Sachs trader Lee Coppersmith noted in a recent memo that net leverage has also risen to four-year highs.
At JPMorgan, they are paying special attention to semiconductors. The bank’s strategist Nikolaos Panigirtzoglou believes that too much concentration of positions in this sector increases the risk of new sharp sell-offs.
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This is about VaR shocks. This is what they call situations when rising volatility breaks through funds’ internal risk limits. After that, they have to quickly cut positions.
According to JPMorgan, the share of semiconductor manufacturers in global market capitalization is now more than six times higher than their share of revenue. For comparison, for the Magnificent Seven group, this figure is more than twice as low.
Right now, too much money is concentrated in one theme. If interest in AI starts to cool, technology stocks will feel it the most.
Why the $165 Billion Sell-Off Matters
The trigger for a new wave of selling may not be big headlines, but ordinary quarterly portfolio rebalancing. According to JPMorgan, by the end of June it could force large investors to sell stocks worth about $165 billion.
After strong market growth, funds need to return asset shares to target levels. This means some stocks will have to be reduced.
The largest seller could be Japan’s Government Pension Investment Fund. The fund manages about $1.9 trillion in assets, and the potential volume of sales is estimated at about $60 billion.
U.S. pension funds could add another $55 billion in sales. Norway and Switzerland’s funds could also increase pressure on the market.
Part of this flow could be offset by balanced mutual funds. According to JPMorgan, they could buy stocks worth about $15 billion.
The situation is complicated by the fact that investors are already tense after the latest signals from the Fed. Under Kevin Warsh, the regulator kept rates unchanged but allowed for the possibility of raising them this year.
After that, the market revised its expectations for rate cuts, and volatility increased.
What This Means for Bitcoin
The risks affect not only the stock market. At JPMorgan, they also paid attention to bitcoin: the network’s hashrate has become more dependent on the price of BTC.
For some miners, current prices are already on the edge of comfortable profitability. This adds another weak spot to the crypto market.
Bitcoin was trading around $64,898, and its market capitalization was about $1.28 trillion. In recent weeks, the price has gradually slipped toward the lower part of the $60,000 range.
Bitcoin price in recent times. Source: TradingView.
BTC is increasingly behaving like a tech stock rather than a defensive asset. It fell along with the market after the FOMC meeting and reports from companies related to AI.
If forced stock sales coincide with high leverage and overheated bets on AI, volatility could spill over into several markets at once.
The coming days will show whether this rebalancing turns out to be an ordinary technical event or the cause of a more serious correction.
