AI Stock Rally Amid Margin Call Storm! 'AI Stock God' Fund Forced to Liquidate, Wall Street Hedge Funds Still Reeling in July

In the first half of this year, many prominent technology-focused hedge funds delivered strong performance, but July became a sobering downturn period.

According to Business Insider, in mid-July, amid deteriorating sentiment in Asian markets, several popular artificial intelligence (AI) stocks suffered sharp declines, including SanDisk (SNDKV-US), Bloom Energy (BE-US), and CoreWeave (CRWV-US).

Additionally, large-cap tech stocks such as Alphabet (GOOGL-US), Google's parent company, and Meta (META-US) faced mild selling pressure, as markets remained concerned about both companies pouring nearly all their free cash flow into AI and computing infrastructure investments.

Meanwhile, shares of major chipmakers like TSMC (2330-TW) and Micron Technology (MU-US) were also dragged down.

Notably, just as the market was preparing to assess the full extent of July's losses in the first week of August, a major market event abruptly interrupted the prolonged downtrend.

After weeks of steep stock declines and repeated margin calls from partner banks, Situational Awareness, the hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, was ultimately forced to sell off most of its listed equity holdings.

This large-scale liquidation unexpectedly triggered a sharp rebound in the aforementioned AI-related stocks. Citadel, which secured the portfolio after outbidding Millennium and Jane Street, emerged as the primary beneficiary.

While this rebound provided temporary relief to the market, for many other hedge funds holding the same stocks, the rally came too late to salvage their July performance.

Nonetheless, due to strong first-half results, several funds may still maintain positive year-to-date returns. For example, according to insiders, although Situational Awareness lost as much as 67% in July alone, its year-to-date return still reached 80%.

The report notes that the shareholding data mentioned were all as of the end of the first quarter. Funds may have adjusted, reduced, or fully exited certain positions in the past few months.

For instance, Whale Rock Capital, a Boston-based tech investment firm led by Alex Sacerdote, achieved over 70% returns in the first half, largely benefiting from the same group of AI-related stocks as Situational Awareness.

However, Whale Rock has recently come under pressure due to the sharp pullback in these stocks.

Regulatory filings show that Whale Rock, which manages approximately $19 billion in assets, continued to increase its stakes in SanDisk and Bloom Energy during Q1. Although both stocks surged over 20% on Thursday (30th), by Friday (31st) noon, SanDisk's share price was still down about 45% from early July, and Bloom Energy remained down around 30%.

On Friday, SanDisk closed down 5.09%, and Bloom Energy fell 0.63%.

Meanwhile, Gavin Baker, founder of Atreides Management, and Brad Gerstner, founder of Altimeter Capital, both increased their stakes in cloud computing firm CoreWeave during Q1.

CoreWeave's stock jumped over 20% on Thursday after the portfolio transfer, but this rebound only recovered a small portion of its July losses. CoreWeave closed down 2.88% on Friday.

Additionally, the so-called 'Tiger Cubs'—hedge funds with roots in Tiger Management, founded by the late billionaire Julian Robertson—regained prominence in the first half of this year amid the AI investment boom.

As of the end of Q1, tech stocks were the largest holdings for funds including Coatue Management, Tiger Global Management, Maverick Capital, and Light Street Capital.

Interestingly, even some large tech stocks not on Aschenbrenner's holdings list benefited from the buying surge following Situational Awareness's collapse.

For example, TSMC, the world's leading semiconductor foundry, is a key holding for Coatue, Maverick, Tiger Global, and Light Street. After Thursday's rebound, it recovered about a quarter of its July losses.

Semiconductor equipment maker Lam Research (LRCX-US) also surged over 10% on Thursday, though it is still expected to end July with a cumulative decline of around 30%. The company is also a significant holding for Coatue, Tiger Global, and Whale Rock. Lam Research closed down 1.58% on Friday.

Regarding market performance, Tiger Global, Whale Rock, and Light Street declined to comment; Atreides, Maverick, Coatue, and Altimeter had not responded as of publication time.