Hedge Fund Had 76% in Five AI Stocks Before Major Selloff
The 'AI stock god' hedge fund was dangerously concentrated in AI names right before a brutal sector correction hit.
Concentration risk is the oldest mistake in the book, and it just bit one high-profile hedge fund manager hard. The investor known in trading circles as the 'AI stock god' had built Situational Awareness fund into a monument to conviction — and vulnerability. By the end of the first half of 2026, more than three quarters of the entire portfolio was riding on just five stocks, all of them essentially the same trade: AI wins everything.
Two stocks alone accounted for 56% of the fund. That's not a diversified hedge fund — that's a leveraged directional bet wearing a suit. When the AI sector correction arrived, there was nowhere to hide. No ballast, no hedges meaningful enough to matter, just exposure stacked on exposure.
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This is the kind of setup that looks like genius on the way up. The fund almost certainly posted eye-popping returns during the AI boom, which is exactly how you earn a nickname like 'AI stock god' and attract allocators chasing performance. But crowded trades unwind fast, and when five correlated positions all roll over together, the math gets ugly in a hurry.
The broader lesson here is one active traders know but sometimes forget: narrative-driven concentration can survive until it can't. AI is a genuine technological shift, but that doesn't immunize any single stock — or a basket of five — from valuation resets, macro shocks, or simple sentiment turning. Even correct long-term thesis picks can destroy short-term capital if the sizing is reckless.
If you're running a concentrated book in AI names right now, this fund's experience is your stress test. Continue reading at MarketWatch.com.
