How sell-off at flashy AI-focused US hedge fund is a wake-up call for Chinese investors

In July alone, Situational Awareness, which bet heavily on the AI supply chain, reportedly saw its portfolio value plummet 67 per cent Chinese tech investors are hearing warning bells after volatility in US tech stocks forced a fast-rising Wall Street hedge fund to clear its stock portfolio at a steep discount within a few days. “Don’t use leverage! Don’t use leverage! Don’t use leverage!” Shanghai-based public-markets analyst Harry Shen repeated to the South China Morning Post in an interview on Friday. Another warning came from Shanghai-based mainland Chinese stock market veteran Michael Zhang: “Don’t trade with borrowed money. Don’t blindly chase hot topics – because by the time you get in, it might be exactly when others are heading for the exit.” They were both reacting to the collapse of Situational Awareness, a fund founded in 2024 that bet big on AI. It offloaded billions of dollars’ worth of technology shares – funded with bank loans – to Citadel on Thursday, suffering heavy losses after it was unable to meet the collateral demanded by the lenders.

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