This paper examines the role of hedge funds in the technology bubble during the late 1990s. The authors find that hedge funds were heavily invested in technology stocks, contrary to the efficient markets hypothesis which suggests that rational speculators should correct overvalued assets. Hedge funds captured the upturn in technology stocks but avoided significant losses by reducing their positions in stocks about to decline. This behavior is consistent with models that predict rational investors may prefer to ride bubbles due to predictable investor sentiment and limits to arbitrage. The study uses data from hedge fund quarterly equity long positions reported to the SEC, revealing that hedge funds' exposure to technology stocks peaked in September 1999, about six months before the bubble burst. Despite their substantial gains in the technology sector, hedge funds did not exert a correcting force on stock prices. The findings challenge the notion that rational speculators always stabilize prices and highlight the importance of investor sentiment and market frictions in understanding the dynamics of asset bubbles.This paper examines the role of hedge funds in the technology bubble during the late 1990s. The authors find that hedge funds were heavily invested in technology stocks, contrary to the efficient markets hypothesis which suggests that rational speculators should correct overvalued assets. Hedge funds captured the upturn in technology stocks but avoided significant losses by reducing their positions in stocks about to decline. This behavior is consistent with models that predict rational investors may prefer to ride bubbles due to predictable investor sentiment and limits to arbitrage. The study uses data from hedge fund quarterly equity long positions reported to the SEC, revealing that hedge funds' exposure to technology stocks peaked in September 1999, about six months before the bubble burst. Despite their substantial gains in the technology sector, hedge funds did not exert a correcting force on stock prices. The findings challenge the notion that rational speculators always stabilize prices and highlight the importance of investor sentiment and market frictions in understanding the dynamics of asset bubbles.