Since 2026, the capital flow into U.S. technology funds has shown a distinct characteristic of 'initial suppression followed by a rise, with volatile differentiation'. From a significant withdrawal of funds from the technology sector at the beginning of the year to a recent peak of net inflow at a certain stage, this is the result of a combination of macro policy shifts, iterative industry fundamentals, and resonance of market sentiment. Combining the latest capital data and industry dynamics, this article will deeply analyze the core logic and driving factors of the net flow changes in U.S. technology funds, and predict future flow trends to provide a reference for market observation.
1. Current Status of Capital Flow: Volatile Rebound, Structural Differentiation Highlighted
Recently, fund flows into U.S. technology funds have reached a significant turning point, ending the previous phase of net outflows and showing a strong rebound. According to BofA research data, as of the week ending February 10, 2026, U.S. technology funds recorded a net inflow of $6 billion, marking the largest net inflow in nearly eight weeks, indicating a renewed focus of market funds on the technology sector. However, looking back at the fund performance at the beginning of 2026, it showed significant volatility characteristics: in the first five weeks of January, non-tech industry funds absorbed a record $62 billion, with inflow rates far exceeding historical averages, while fund inflows into tech funds significantly slowed; as of the week ending February 4, the technology sector even faced a large withdrawal of $2.34 billion, contrasting sharply with the inflows into value sectors such as industrials and metals mining.
From the perspective of fund types, the structural differentiation in fund flows is particularly prominent. Passive tech ETFs continue to attract long-term funds. For example, as of February 9, 2026, the share price of iShares U.S. Technology ETF (IYW) closed at $196.32, rebounding about 5.1% from the phase low on February 5, with trading volume continuing to expand, reflecting the ongoing demand for long-term allocation of passive funds into the technology sector. In contrast, active tech mutual funds have continued to decline, with a net outflow of $1 trillion for active equity mutual funds in 2025, marking 11 consecutive years of net outflows. The core reason lies in the concentration of technology sector earnings in a few leading firms, making it difficult for active fund managers to outperform benchmark indices, resulting in continuous redemptions by investors.
Within the sector, fund flows display characteristics of 'focusing on leaders while differentiating among segments'. Hard tech fields such as AI computing and semiconductors have become key areas for fund allocation, while some generalized AI tool funds that were previously overhyped and lacking fundamental support face withdrawal pressures; in addition, tech giants like Amazon, Google, and Meta face cash flow pressure due to surging AI infrastructure capital expenditures, resulting in stage fluctuations in the fund flows of their related funds, while stable cash flow leaders like Microsoft continue to attract funds.
2. The core driving factors of fund flow volatility
(1) Macroeconomic Policy: The Federal Reserve has entered a rate-cutting cycle, with liquidity easing empowering the technology sector
The adjustment of the Federal Reserve's monetary policy is the core macro variable affecting the flow of funds into U.S. technology funds. In September and December 2025, the Federal Reserve cut interest rates twice in a row, with December seeing the federal funds rate lowered by 25 basis points to 3.5%-3.75%, in line with market expectations, marking the official start of the Fed's rate-cutting cycle; according to the Fed's dot plot forecast, there may be one 25 basis point cut in each of 2026 and 2027, with the interest rate center gradually moving down. For the technology sector, rate cuts bring threefold benefits, directly driving the return of funds: first, tech stocks are highly sensitive to interest rates, and rate cuts lower the discount rate, significantly enhancing the valuation levels of high-growth tech companies, driving the recovery of tech fund net values and attracting funds; second, rate cuts reduce the debt financing costs for tech companies, especially benefiting AI and semiconductor companies that are in high investment periods, extending their R&D and expansion cycles, improving capital expenditure efficiency, and boosting market confidence in related funds; third, rate cuts weaken the dollar, increase market risk appetite, and global funds flow back into risk assets, with the technology sector as a core representative of growth tracks, becoming a key direction for fund allocation.
(2) Industry Fundamentals: The AI industry is transitioning from 'burning money' to 'monetization', with leading firms driving sector recovery
The iterative upgrade of the fundamentals of the technology industry is the core support for the reversal of fund flows, with the development of the AI industry being particularly critical. Currently, the global AI industry is at a key stage of 'technological breakthroughs + scenario implementations', gradually transitioning from the previous phase of 'burning money for growth' to 'monetization of scenarios', with clear paths to profitability, providing solid fundamental support for technology funds. On one hand, capital expenditures in AI infrastructure continue to grow rapidly. According to JPMorgan data, the total capital expenditures of the four major cloud giants, Amazon, Google, Meta, and Microsoft, are expected to reach $645 billion in 2026, a year-on-year increase of 56%, all directed towards servers, data centers, and custom chips for AI computing infrastructure, leading to an explosion in demand across the related supply chains and attracting funds into AI computing-related technology funds; on the other hand, AI application scenarios are continuously being implemented, with OpenAI's GAA-1 system providing subscription services to enterprise clients, forming a mature business model. Bain & Co data shows that global enterprise AI spending has doubled to an average of $10.3 million per enterprise in 2024, and is expected to exceed $20 million in 2026, with the AI service market transitioning from 'concept validation' to the 'scale payment' phase, further boosting market confidence.
At the same time, the increasing differentiation in the global technology industry also affects fund flows. Goldman Sachs points out that the global technology industry is currently at a dual turning point of 'technological sovereignty' and 'intelligent revolution'. China's 7-nanometer lithography technology has achieved large-scale production, promoting the global semiconductor supply chain towards a 'dual system of China and the U.S.', further enhancing the geopolitical attributes of the technology industry, causing funds to focus more on U.S. technology leaders with independent technological capabilities, while funds for small and medium-sized technology enterprises lacking core technology face withdrawal pressures.
(3) Market Sentiment and Fund Rotation: Extreme crowded trades loosen, funds flow back into the technology sector
The fluctuations in fund flows at the beginning of 2026 are essentially a phase rotation adjustment of market funds, rather than a deterioration in the fundamentals of the technology sector. Deutsche Bank's research report points out that since January 2026, funds have been fleeing from large tech stocks into materials, industrials, and other non-tech sectors. The catalyst was the signs of profit growth outside of tech giants during the third quarter of 2025 earnings season, leading investors to diversify their allocations; however, this crowded trade in non-tech sectors has shown signs of fatigue, with inflows into materials exceeding historical averages by more than 5 standard deviations, creating a phase bubble, while the technology sector has seen its valuations return to reasonable ranges after prior adjustments, gradually increasing its attractiveness.
Moreover, the reversal of market sentiment has also driven funds back into the technology sector. The prior decline in the technology sector was mainly driven by valuation contraction rather than a deterioration in fundamentals. The long-term earnings expectations for large growth stocks and technology stocks in 2026 are actually rising, with expectations for 2026 up by 2.0% and for 2027 up by 2.6%. The stability of the fundamentals supports the repair of market sentiment, leading to a renewed allocation of funds into technology funds, creating a dual-driven trend of 'valuation repair + earnings enhancement'.
3. Potential Risks: Multiple pressures create uncertainty in fund flows
Despite a recent rebound in net inflows into U.S. technology funds, internal industry conflicts and external environmental uncertainties may still lead to fluctuations in fund flows, necessitating close attention to three major risks.
First, the cash burn pressure in AI infrastructure is highlighted, with some leading tech firms facing cash flow pressure. The high capital expenditures of the four major cloud giants in 2026 have led to a significant shrinkage of cash flow. Amazon's capital expenditure is expected to reach $200 billion in 2026, but its operating cash flow is only $178 billion, resulting in substantial cash net outflows. Meta and Google's free cash flow also face significant contraction pressure. If the subsequent AI monetization progress falls short of expectations, relevant leading funds may face withdrawal pressures, which could impact the fund flows of the entire technology sector.
Second, the pace of the Federal Reserve's rate cuts may not meet expectations, putting pressure on the logic of liquidity easing. The current market widely anticipates that the Federal Reserve will implement a 25 basis point rate cut in 2026, but if U.S. inflation rebounds and employment data is unexpectedly strong, the Fed may delay the rate cut process or even maintain the current interest rate levels. If rate cut expectations are unmet, the logic of valuation recovery for the technology sector will be disrupted, and high-growth tech stock valuations may contract again, hindering the return of funds into technology funds and possibly leading to a reemergence of phase net outflows. Furthermore, if the rate cut is less than expected, the market's risk appetite may struggle to sustain its recovery, weakening the motivation for global funds to allocate to the technology sector.
Third, escalating geopolitical conflicts increase the risk of disruptions in the technology supply chain. The geopolitical attributes of the global technology industry are continuously strengthening, with escalating competition between the U.S. and China in core technology fields like semiconductors and AI. U.S. technology export controls to China may tighten further, while breakthroughs in high-end chip technology in China could trigger a reconstruction of the global technology supply chain. If geopolitical conflicts intensify, it may lead to interruptions in global technology supply chains and shortages of key components, affecting the production and profitability of U.S. technology companies, which in turn could trigger panic withdrawals from technology funds and exacerbate fluctuations in fund flows.
4. Summary and Future Trend Predictions
In summary, the fluctuations and rebounds in fund flows into U.S. technology funds since 2026 are the result of multiple factors resonating, including the start of the Fed's rate-cutting cycle, the AI industry's transformation towards monetization, and market fund rotation adjustments. Structural differentiation is an inevitable product of the interplay between the industry's development stage and market preferences. In the short term, the net inflow of funds into technology funds is expected to continue, with core support coming from expectations of liquidity easing, ongoing improvements in the fundamentals of the AI industry, and reasonable corrections in technology sector valuations, with hard tech fields such as AI computing and semiconductors, as well as cash flow stable leading tech funds, remaining key focus areas for fund allocation; passive tech ETFs are expected to continue attracting long-term funds, while active tech mutual funds may find it difficult to reverse net outflows if they cannot improve their performance against benchmark indices.
In the medium to long term, the fund flows into U.S. technology funds will show an overall trend of 'fluctuating upwards with increasing differentiation', but multiple potential risks should be watched closely. If the AI monetization progress meets expectations and the Federal Reserve implements rate cuts as scheduled, the growth logic of the technology sector will be further strengthened, and funds will continue to concentrate in core areas, driving the overall scale of technology funds to rebound; however, if AI monetization fails to meet expectations, the pace of rate cuts slows, or geopolitical conflicts escalate, fund flows into technology funds may fluctuate again and even fall back into a phase of net outflows.
For market participants, it is crucial to focus on three core variables: first, the pace of monetary policy adjustments by the Federal Reserve, tracking interest rate decisions and changes in the dot plot to assess the extent of liquidity easing; second, the development dynamics of the AI industry, focusing on capital expenditures in AI infrastructure and the progress of application scenarios to seize core track investment opportunities; third, changes in geopolitical and industry competition patterns, avoiding risks arising from supply chain disruptions. Overall, the long-term growth logic of the technology sector remains unchanged, but short-term volatility and structural differentiation will become the norm, and changes in fund flows will continue to reflect market expectations for the industry's fundamentals and macro environment.
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