Several prominent hedge funds reported significant losses in July, primarily driven by a downturn in artificial intelligence (AI) and semiconductor stocks. Whale Rock Capital, managed by Alex Sacerdote, experienced a 21.7% decline in its flagship fund, reducing its year-to-date gains to 35.1% from 72.5% through June, according to a source close to the firm. The fund's long-only strategy also suffered, falling 18.8% last month but still up 36.8% for the year.
Key Details
Philippe Laffont's Coatue Management lost 8.3% in July, bringing its 2026 returns to 14.3%. Meanwhile, Marshall Wace's Eureka fund, which employs a long-short strategy, was down 6.9%, with year-to-date gains at 11.6%. The declines came amid broader market jitters, particularly affecting major players like Google and Meta, as investors expressed concerns over AI spending.
The situation was exacerbated by the collapse of Situational Awareness, a fund led by former OpenAI researcher Leopold Aschenbrenner, which reported a staggering 67% loss in July. This prompted Aschenbrenner to seek a buyer for his public equity portfolio to meet margin calls, leading Citadel to purchase a significant portion of it. This transaction reportedly helped stabilize the market, particularly in tech stocks, despite the overall losses.
Background
Other hedge funds also faced challenges. Millennium Management lost 2.1%, while Asia-based funds Dymon Asia and Pinpoint fell 6.5% and 9%, respectively, amid regional market instability. The S&P 500 index managed to decline only 0.1% in July, aided by the rebound in tech stocks following Citadel's purchase.
Related coverage: Asian Markets Drop as Fed Holds Rates, AI Stocks Decline.
The losses in hedge funds, particularly those heavily invested in AI, could lead to increased volatility in tech stocks as investors reassess their positions. The declines may also influence broader market sentiment, particularly in the technology sector.
Investors will watch for the upcoming earnings reports from major tech companies, which could provide insights into the industry's health amid ongoing AI investment concerns.
Based on reporting by: businessinsider.com