Worst period for hedge funds since 2008 after AI stock rout

Worst period for hedge funds since 2008 after AI stock rout

Mon, August 10, 2026 at 4:09 PM GMT+3 2 min read

Hedge funds focused on AI stocks have suffered their worst month since 2008, according to new figures.

A plunge in the value of US tech giants and Asian semiconductor groups led tech funds to drop by 7pc in July, according to new data from Hedge Fund Research (HFR).

This is the worst period for them since the depths of the global financial crisis in January 2008.

The slump underlines fears about an unravelling of the AI tech boom, which has driven Wall Street to record highs.

Alarm over a possible bubble in tech stocks grew after an AI-focused hedge fund, Situational Awareness, founded by Leopold Aschenbrenner, came close to collapse amid a 67pc fall in value.

It forced the 24-year-old investor, once hailed as the "Nostradamus of AI", to sell the bulk of his fund's portfolio to Ken Griffin's Citadel, under pressure from Wall Street lenders whose money he was using to make big bets on AI stocks.

Bruno Schneller, the managing partner of Erlen Capital Management, said the problems at Situational Awareness were a "near-perfect microcosm" of July's hedge fund decline.

"When valuations are elevated, and positioning is concentrated, the difference between being on the right and wrong side of a trade can become unusually large – and very quickly," he said.

"Specialist technology strategies can generate exceptional returns when momentum and narrative are aligned, but they can also experience abrupt, leverage-amplified reversals when those conditions change," he said.

Other funds have also been wrong-footed by the sell-off, which saw the Nasdaq 100 index fall by more than 5pc in July.

According to Bloomberg data, Altimeter Capital Management, the Boston fund founded by American billionaire Brad Gerstner, lost 11pc last month, while Balyasny Asset Management and Verition Fund Management lost 1.5pc and 1.1pc, respectively.

Marshall Wace, the hedge fund controlled by Paul Marshall, the billionaire owner of The Spectator and GB News, was also among last month's losers. Its Eureka stock-trading fund posted a 6.9pc drop, according to Business Insider.

More broadly, the widespread volatility saw hedge funds as a whole record average losses of 1.1pc last month amid rising oil prices.

However, there was a major split between the best and worst-performing funds, with the top tenth of investors recording average gains of 7.6pc, compared with 12.5pc losses for the bottom tenth.

Kenneth Heinz, the president of HFR, said: "Hedge funds navigated an extremely intense and volatile trading environment in July, with exposure to negative technology momentum contributing to the largest decline for technology hedge funds since 2008."

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