CA pension funds were hedging Nvidia even before the affair
By Lynn La, CalMatters ·
Does the global economy hinge on one leather-clad CEO’s affair with an alleged Chinese spy? You might find it reassuring that your pension fund has been preparing for some kind of AI downturn, if not that specific scenario.
We have some breaking news today. California voters officially rejected Prop. 40, the measure that would have levied a wealth tax on billionaires.
In other news, the 9th Circuit Court of Appeals scaled back a California climate law and we have a new survey for you from our friends at Your Local Epidemiologist.
California’s biggest public pension funds were already shaving their holdings in high-flying tech companies before news about Nvidia CEO Jensen Huang’s affair with an alleged Chinese spy sent the AI giant’s stock plunging.
After last week’s Democratic blue wave, stocks — particularly for artificial intelligence companies — tumbled largely due to investors’ fears over regulation. In a single day, the S&P 500 lost $2.8 trillion.
But even in the months before Election Day, worries about an overheated market triggered selling: In the first half of 2026, the California Public Employees’ Retirement System sold off 26% of its holdings in the top-performing tech companies, known as the Magnificent 7, according to an analysis by the Financial Times.
CalPERS’ deputy chief investment officer, Anton Orlich, reportedly told the Times it was to diversify equity risk. That analysis followed a September meeting where CalPERS board members talked openly about the tradeoffs they saw in the fund’s AI investments.
Another behemoth fund — the California State Teachers’ Retirement System — has been eying the inflated stock market and trying to assess when to shift its holdings.
In September, CalSTRS heard from advisers who pointed out that seven public companies accounted for one-third of the total value of the U.S. markets. Only the 1999-2000 tech boom — which was followed by a bust — had a greater gap between companies’ earnings and their valuations.
CalSTRS Chief Investment Officer Scott Chan at that meeting warned against putting more money into that sector.
- Chan: “I believe now in a bull market that it is even more important for us to diversify the portfolio rather than move more in a bull market that has been running for some time.”
Stocks for the Magnificent 7 haven’t been doing too hot recently. While Apple, Microsoft and Amazon have risen between 2% to 4%, artificial intelligence chip-maker Nvidia dipped this month by 22% and continued to decline as Huang confirmed his affair. Tesla, Alphabet and Meta stock also slumped this month, with the latter two falling by double-digit percentages.
But the stock market is a major reason why CalPERS and CalSTRS have been beating their earning targets as of late. CalPERS portfolio is currently valued at more than $650 billion, and in July it announced it gained an investment return of 14.8% for the 2025-26 financial year, more than doubling its target of 6.8%.
CalSTRS’ assets total more than $415 billion as of September, with a 13.9% investment return for the same period.
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Billionaire tax fails
The latest election results show that Proposition 40, which would have levied a one-time wealth tax on the 200-or so wealthiest Californians, failed.
It was the biggest fight on the ballot with billionaires spending hundreds of millions of dollars against it and Democratic groups splintering over its potential to drive away some of the highest-earning taxpayers. Gov. Gavin Newsom opposed it, as did Democratic mainstays the California Teachers Association and Planned Parenthood.
- Evan Westrop, a No on Prop. 40 campaign strategist: “Proposition 40 was a reckless experiment conducted on our state’s economy with little regard for the harms it would cause.”
We’re still waiting for final results in one of the five tax measures that went to voters on last week’s ballot. Prop. 42, which would prohibit new taxes on assets, is leading in returns so far.
We know that one additional measure passed and will become law. That’s Prop.38, which would issue $8.4 billion in bonds to fund medical research.
Split ruling on new CA climate laws
From CalMatters’ Molly Peterson:
California can make large companies report the greenhouse gases they produce, a federal appeals court ruled Monday. But the state can’t force them to count emissions from their suppliers and customers or predict how climate change could hurt their business.
The divided 9th Circuit Court of Appeals panel, ruling in a lawsuit brought by business groups led by the U.S. Chamber of Commerce, said the state can require companies to share basic facts about their own pollution, but the other requirements likely violate their free-speech rights. The decision lets California enforce the nation’s first broad emissions-reporting mandate for about 2,000 large public and private companies.
A dissenting judge would have blocked both laws entirely, and either side could still ask the full 9th Circuit or the Supreme Court to step in. The decision centered on a pair of 2023 climate laws, which were known as Senate bills 253 and 261.
And lastly: What do you want public health officials to know?
Have an opinion on what health issues should be prioritized in California? CalMatters is partnering with Your Local Epidemiologist to make the real concerns and questions from Californians heard by public health officials and journalists.
Every week, we’ll ask about health topics affecting Californians, and it’ll only take two minutes to answer.
This week, we’re asking about the health impacts of rising online gambling trends and perimenopause. Take the survey.
California Voices
CalMatters columnist Dan Walters: The race for Los Angeles County executive has begun, and whoever wins will not only be the top official in the county, but will also be the leading potential candidate for governor or U.S. senator.
For California Muslims, the diversity of elected candidates from the midterm elections does not mean Islamophobia or discrimination has disappeared — but it does signal that fear did not silence participation, writes Tahra Goraya, a member of the California Commission on Asian and Pacific Islander American Affairs.
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