(Bloomberg) — Value Aligned Research Advisors, a hedge fund that has been all-in on the AI trade, tumbled 33% last month as those stocks faced a painful reckoning.
The firm, which has operated a portfolio similar to Leopold Aschenbrenner’s Situational Awareness, told investors with Class C shares that its fund was still up 13% for the year, according to a person familiar with the matter, who asked not to be identified discussing non-public information. The hedge fund fared even worse in July, when it plunged 44%.
A weekslong rout — driven by mounting anxiety over whether AI will deliver profits big enough to justify the hundreds of billions of dollars of debt that technology companies are taking on to build bigger and better models — ended with the Nasdaq 100 Index tumbling 6.7% in October, its deepest slide in more than a year and a half.
The pain has continued this month. The Philadelphia Semiconductor Index, home to chip bellwethers like Nvidia Corp., Intel Corp. and Advanced Micro Devices Inc., tumbled 12% on Thursday, the most since March 2020.
“While we don’t provide month-to-date estimates, the broader equity market, and the AI sector in particular, experienced extreme volatility in November,” VARA said in a letter to investors on Thursday. “The firm remains healthy and stable; we have had no material changes to our counterparty relationships and have maintained excess margin throughout. We continue to manage the portfolio at the low end of our historical leverage range, and we remain constructive on the forward-looking opportunity set.”
A representative for Princeton, New Jersey-based VARA declined to comment.
VARA and Situational Awareness have seen their fortunes swing as leveraged and crowded bets on AI companies have been tested this year from a barrage of margin calls.
Aschenbrenner’s rapid rise — from working as a researcher at OpenAI to building a $45 billion hedge fund in roughly two years and without an investment track record — was interrupted by spectacular losses in July. Faced with margin calls, the firm was forced to unwind trades and sell many of its holdings in publicly traded AI companies to Ken Griffin’s Citadel at a discount. Still, the firm has survived and is still making new investments.
–With assistance from Katherine Burton.
More stories like this are available on bloomberg.com
