A Brutal October
Hedge funds are getting hit hard by the AI selloff, per Bloomberg, and the October numbers are ugly across the industry:
- VARA ($20B): down 33% in October, after a 44% drop in July
- Arini ($22B): down 26%
- Atreides ($3.4B): down 9.5%
- Lone Pine ($20B): down 8.8%
- Tiger Global ($78B): down 8.5%
- Whale Rock ($13B): down 8%
- Engineers Gate ($5B): down 5.5%, cutting its stock-picking team
- Marshall Wace ($70B): down 5.4%
- D1 Capital ($40B): down 5%
- Samlyn ($7B): down 5%, dumping all but financial stocks and cutting analysts
- Walleye ($17B): down 5%, cutting most of its equities team
- Balyasny ($37B): down 3.4%
- Sona ($25B): down 3%
- Brevan Howard ($35B): cutting 5 portfolio managers and its head of credit
- Diameter ($29B): wiped out its gains for the year
The Unwind Feeds Itself
The pattern is the classic one: the funds most concentrated in the AI trade took the deepest losses when it cracked, and their selling to meet redemptions and margin pressure pushed the same names lower. The Philadelphia Semiconductor Index fell 21.8% across five sessions into early November, its worst stretch since September 2001, and leveraged chip ETFs amplified the damage on the way down.
The staff cuts at Engineers Gate, Walleye, Samlyn, and Brevan Howard show firms treating this as more than a one-month drawdown. Teams built for the AI momentum trade are being dismantled while the trade is still unwinding.
Options and Market Impact
Forced deleveraging is a flow story before it is a fundamentals story. Watch put buying and volatility bids in Nvidia, Broadcom, AMD, and Micron, plus the SMH semiconductor ETF, where fund liquidations show up first.
The flip side matters too: when the last forced seller is done, crowded shorts and washed-out positioning can snap back violently. Unusual call sweeps in beaten-down AI names are the tell that the unwind is ending.
Bottom Line
October separated the AI trade's tourists from its owners. The losses are real, the layoffs are real, and the deleveraging may not be finished.
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