Top Funds Dump 10 Stocks (Including Alphabet), Morningstar Says

• Alphabet is being sold despite heavy AI investments, with some fund managers questioning whether massive spending on AI chips and large language models will generate adequate returns
• MercadoLibre faces fund redemptions despite solid earnings growth, while Warner Bros. Discovery sells reflect the Paramount Skydance acquisition removing upside potential
• Other major sells include Apple (-4.4% YTD), TE Connectivity (-9.3%), and American International Group (-9.3%), while some sold stocks like ASML (+24.5%) and Deere (+28.8%) have performed strongly year-to-date

Summary: Top Mutual Funds Reduce Holdings in 10 Major Stocks

According to Morningstar analysis, elite-rated mutual funds are significantly cutting positions in 10 major stocks, led by Alphabet (GOOGL), MercadoLibre (MELI), and Warner Bros. Discovery (WBD).

Key Stocks Being Sold

The analysis tracked actively managed U.S. large-cap growth and blend funds with Morningstar's gold, silver, or bronze ratings and portfolios of 50 stocks or fewer. Top sells include:

• Alphabet: Down 2.1% YTD, despite major AI investments in proprietary chips and large language models
• MercadoLibre: Down 12.2% YTD, even with solid earnings growth
• Warner Bros. Discovery: Down 3.7% YTD, following agreement to be acquired by Paramount Skydance
• Apple (AAPL): Down 4.4% YTD
• American International Group (AIG): Down 9.3% YTD

Notable positive performers being sold include ASML Holding (+24.5% YTD), Deere (+28.8% YTD), and EOG Resources (+25.4% YTD).

Market Implications

Dave Sekera, Morningstar's chief U.S. market strategist, noted that while "broad market indexes have traded within a relatively narrow range this year," significant sector-level rotation is occurring beneath the surface.

The Alphabet sell-off signals growing investor skepticism about returns on massive AI spending, despite the company's aggressive push into AI infrastructure. Fund managers appear to be taking profits on strong performers and reducing exposure to concerns around AI capital expenditure payoffs and merger arbitrage situations.

This "smart money" movement suggests increased selectivity and portfolio repositioning despite surface-level market stability.