Situational Awareness Down 67% in July as AI Stocks Rout
Situational Awareness Down 67% in July in AI Stock Rout
Investor focus on AI stocks has sharply declined this July, with situational awareness dropping by 67%. The market rout reveals a significant shift in sentiment as traders reassess valuations and future growth prospects for major tech players. This sudden change highlights the volatility inherent in the current AI investment landscape.
The rapid decline in situational awareness suggests that the market's enthusiasm for AI has cooled faster than anyone anticipated.
- scrlk
- vessenes
This is everywhere. For reference, former FTXer and OpenAIer raised $225m into a hedge fund structure, went long and short, and reportedly peaked at $40bn of value; leverage bit hard this week and they sold their entire-ish portfolio to Citadel at $10bn. (Which, I imagine was very likely aiming at this outcome in their trading in the last few weeks).
Not reported anywhere -- was additional money raised in to the fund, and what is the LP basis? The story might be: wunderkind 40x+ed his first hedge fund and sold it to Citadel, or it might be: wunderkind raised $20bn and turned it into $10bn fast trading against Citadel.
Inquiring minds want to know!
- cmiles8
An inexperienced portfolio manager that’s never seen a down tech market in his life has created a massively leveraged position on frothy assets in a bubble and the bubble is looking ill. What could possibly go wrong.
Many of these AI plays are massively entangled and leveraged. It all looks good until it doesn’t and when there’s a hiccup things unravel quickly and exponentially. I fully expect in the next 12 months we’re going to see some rather spectacular investment implosions with folks losing their shirts. Get your popcorn ready.
- scrlk
> Aschenbrenner party blamed short sellers who targeted the firm’s positions for exacerbating the fund’s losses, the letter said. The letter compared Situational’s experience to a bank run.
4 years ago, it was SBF blaming Changpeng Zhao for shorting FTT and triggering a run on FTX.
Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast, using the exact same arguments for why it happened.
- asats
>Even including July's losses, the fund remains up about 80% on the year
Spectacular blowup and a lesson on leverage, but let's not miss this line.
- ymolodtsov
I like how Matt Levine formulated it.
His thesis was correct. The problem is, his thesis was measured in years if not decades when his funding was measured in days and hours.
- bagacrap
I don't understand why this thing is called a hedge fund. Usually, a hedge fund makes many non-correlated bets across many markets (commodities, stocks, bonds, public and private markets).
This guy made exactly one bet, which is that AI would eat software (long AI hardware stocks, short Adobe etc), leveraged it to the tits, and kept adding more leverage even as the trade moved in his favor.
Where is the "hedge"? Normally we just call this a "fund".
- alasr
Earlier on HN:
Martin Shkreli breaks down the collapse of Situational Awareness - https://news.ycombinator.com/item?id=49119380
Edit: added context