{"id":798370,"date":"2026-08-02T00:57:32","date_gmt":"2026-08-02T00:57:32","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/798370\/"},"modified":"2026-08-02T00:57:32","modified_gmt":"2026-08-02T00:57:32","slug":"the-markets-big-ai-doubts-are-exposing-the-riskiest-players","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/798370\/","title":{"rendered":"The market\u2019s big AI doubts are exposing the riskiest players"},"content":{"rendered":"

New York\u00a0\u2014\u00a0\n <\/p>\n

\n The meteoric rise and stunning near-collapse this week of a US hedge fund has sent shockwaves across global markets, becoming a kind of cautionary tale for the AI era.\n <\/p>\n

\n On Thursday, the San Francisco fund Situational Awareness, founded by a former OpenAI researcher with no professional investing experience, was forced to sell the bulk of its public holdings to a bigger rival after its investments soured and it faced a raft of margin calls from lenders.\n <\/p>\n

\n In a matter of days, the aggressively AI-concentrated fund went from being the envy of Wall Street \u2014 Situational was reportedly up more than 400% this year \u2014 to needing a bailout by a larger rival, a dramatic turn that\u2019s deepening investors\u2019 anxiety about the sustainability of the AI momentum trade and the risks of leaning on leverage.\n <\/p>\n

\n But much of what ailed the firm is not unfamiliar to investors around the world, as they\u2019ve sought to amplify their exposure to the parabolic gains in AI-related stocks. Situational borrowed heavily from lenders to buy tech stocks, a strategy that works well when the market is going up, and fails spectacularly when the mood sours.\n <\/p>\n

\n When economists warn about the risks of too much concentration in the stock market, this situation is what they\u2019re talking about: The financial world is deeply interconnected, for better or worse, making one relatively small hedge fund\u2019s bad day a problem for everyone \u2013 from mom and pop investors to asset managers overseeing funds in millions of 401(k)s.\n <\/p>\n

\n Just a few weeks ago, Situational Awareness and its founder, Leopold Aschenbrenner, were riding high. The former OpenAI researcher\u2019s core investing thesis centered on the belief that AI demand would continue to grow, requiring a massive buildout of data centers, chips and electricity infrastructure.\n <\/p>\n

\n His fund\u2019s holdings included South Korean memory chip maker SK Hynix, which debuted shares<\/a> on US markets this month, as well as Sandisk and AI cloud provider Nebius \u2014 all of which suffered huge market losses in recent weeks.\n <\/p>\n

\n Situational relied on leverage, or borrowing money to trade in order to magnify returns. When leveraged bets work out, the payout is sweet. But when things go awry, the losses can be steep. Traders can have their accounts liquidated if losses get too extreme.\n <\/p>\n

\n As the value of Situational\u2019s investments fell, the fund faced margin calls from lenders, forcing the firm to sell all of its public stock holdings. Citadel, a rival hedge fund, effectively bailed out Situational Awareness by acquiring most of the fund\u2019s portfolio. The fund retains some holdings in private companies, including a large stake in Anthropic, according to several reports.\n <\/p>\n

\n The details of Situational\u2019s struggle have been played for laughs and memes across trading desks and social media. Many are relishing irony of the young firm\u2019s name \u2014 taken from the title of a viral essay Aschenbrenner wrote in 2024 \u2014 the apparent hubris of its Gen Z founder, and the dramatic rescue by Ken Griffin\u2019s Citadel, one of the most competitive and profitable hedge funds in the world.\n <\/p>\n

\n Aschenbrenner, who is reportedly<\/a> getting married this weekend in California, didn\u2019t immediately respond to a request for comment.\n <\/p>\n

\n Market volatility has been especially pronounced in South Korea , which, like the US market, is heavily concentrated on tech and AI.\n <\/p>\n

\n The top eight stocks in the S&P 500 \u2013 all tech \u2013 make up almost 40% of the index\u2019s market value. In South Korea, things are even more tightly bound, with two chipmakers \u2013 SK Hynix and Samsung \u2013 making up half of the Kospi\u2019s value.\n <\/p>\n

\n The Kospi surged as much as 116% from the start of the year to its peak on June 22. Since that record high, the index has dropped 28%.\n <\/p>\n

\n The Korean market\u2019s selloff was one of the first signs of trouble for Situational Awareness, which invested heavily in SK Hynix. Since hitting a peak in late June, shares of SK Hynix have fallen 40%.\n <\/p>\n

\n SK Hynix shares bounced back on Friday following reports that Situational sold its holdings.\n <\/p>\n

\n The extraordinary moves in the Kospi have laid bare just how widespread the use of leverage is in South Korea, by both professional investors and everyday traders. The Kospi has tripped nine circuit breakers this year, sending South Korea\u2019s market into a state of chaos.\n <\/p>\n

\n Margin calls in South Korea have become such a regular occurrence that the South Korean finance ministry this week introduced new restrictions on single-stock leveraged ETFs, trying to cool the frenzy.\n <\/p>\n

\n The volatility matters for US markets, too: The PHLX Semiconductor Index, a benchmark that tracks 30 chip stocks, surged almost 90% in the second quarter before tumbling more than 20% in July and entering a technical bear market.\n <\/p>\n

\n Leverage in the stock market isn\u2019t anything new. Prior bubbles and crashes were exacerbated by trading on the margin.\n <\/p>\n

\n But the current turmoil is not necessarily a sign that the AI bubble is popping. All told, the S&P 500 is less than 3% away from a record high.\n <\/p>\n

\n As with any market frenzy, when volatility strikes, people with too much leverage in either direction get taken to task. That applies to regular everyday investors as well as the pros.\n <\/p>\n

\n This could just be a shaky moment that the market recovers from. By Friday, tech stocks were already bouncing back thanks to investors buying the dip.\n <\/p>\n

\n The S&P 500, the Nasdaq and the Dow Jones Industrial Average were all up about 0.5% Friday afternoon.\n <\/p>\n","protected":false},"excerpt":{"rendered":"New York\u00a0\u2014\u00a0 The meteoric rise and stunning near-collapse this week of a US hedge fund has sent shockwaves…\n","protected":false},"author":2,"featured_media":798371,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45],"tags":[182,181,507,74],"class_list":["post-798370","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/798370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=798370"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/798370\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/798371"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=798370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=798370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=798370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}