Traders are fleeing the year's hottest investment

• Bank of America Merrill Lynch clients sold more than $1 billion of tech stocks last week.
• Tech stocks in the S&P 500 are up 23% this year, more than double the benchmark.

The scorching-hot tech trade is showing signs of fatigue.

Investors sold more than $1 billion in tech stocks last week, the biggest offloading since January 2016, according to client data compiled by Bank of America Merrill Lynch.

Breaking the exodus down further, all three groups monitored by BAML - hedge funds, institutional clients and private clients - sold shares in tech companies during the period.

BAML notes that the majority of the sales came from private clients, which means that there could be untapped selling pressure building in the institutional ranks, where a significant portion of holdings lie.

"We see risk for further outflows," BAML equity and quant strategists led by Jill Carey Hall wrote in a client note. "We've been highlighting the risk that investors may rotate out of tech, which is extremely crowded by mutual funds and growing increasingly expensive on some measures, and into less-crowded value-oriented sectors."

It's not entirely surprising that investors would take some profits in an area that's outperformed this year. Having surged 23% year-to-date through Monday, the S&P 500 Tech Index has been the best-performing industry of 2017, more than doubling the return of the benchmark S&P 500.

What is surprising is how long it's taken for investors to hop off the tech train. For months, strategists across Wall Street have been warning that overcrowded trades such as the one in tech could result in massive downside, should a market shock occur.

Now that investors are increasingly heading for the exits, the question becomes: Is this simple profit-taking by bulls who will re-enter the tech space once valuations are a bit cheaper, or is it the start of a seismic shift away from one of the stock market's most reliable areas?

Stay tuned.