Key Takeaways
- • Unconfirmed rumors on October 15 that AI-focused hedge fund Value Aligned Research Advisors (VARA) was liquidating holdings have renewed concerns about leveraged AI stock bets, though no credible reports have verified the claim.
- • VARA, founded last year by former BlackRock executive Ben Hoskin and former Hudson River Trading executive David Field, held about $40.1 billion in positions across 123 common stocks and options as of end-June, and recorded a 44% loss in July.
- • Goldman Sachs' hedge fund trading desk reported net selling in a global AI stock basket between October 8 and October 14 was the second largest in the past year, wiping out all cumulative net buying since early last year.
- • Money has rotated into defensive sectors such as healthcare and consumer staples, with trading dominated by unwinding of long positions rather than new short selling.
- • Analysts remain divided: Barclays attributes weakness largely to position adjustments, while AWS's CFO says AI demand is real and AI servers pay back in under three years; upcoming earnings will test whether cloud spending converts into profits.
Summary
Rumors that Value Aligned Research Advisors (VARA), an AI-focused hedge fund, was unloading holdings circulated across US social media and investor forums on October 15. No credible reports have confirmed the claim, and no concrete details on the scale of any potential liquidation have surfaced, according to the original report.
VARA was founded last year by former BlackRock executive Ben Hoskin and former Hudson River Trading executive David Field. As of the end of June, it held about $40.1 billion in positions across 123 common stocks and options. Its largest common-stock holdings included Bloom Energy and Nebius at about $1.7 billion each and CoreWeave at about $1.1 billion. AI hardware names including Micron, SanDisk and Seagate were also major investments. The fund recorded a 44% loss in July alone. Those stocks have recently come under pressure, raising concern that losses at one leveraged fund could force selling that spreads to other holders of the same names, since falling prices erode collateral and trigger margin calls.
Separately, Goldman Sachs' hedge fund trading desk said net selling in a global AI stock basket between October 8 and October 14 was the second largest in the past year. It erased all cumulative net buying built up since early last year. Trading was dominated by unwinding existing long positions rather than new short selling, as capital rotated into healthcare and consumer staples.
Financing conditions are adding pressure. Goldman Sachs executive Rich Privorotsky said high capital costs could prevent AI demand from translating into capital investment. In a worst-case scenario, the semiconductor supply chain could face an "order gap" in 2027 and 2028, as higher borrowing costs delay data-center construction and equipment orders even if demand holds.
Other market participants argue it is too early to conclude demand is breaking down. Barclays said recent weakness was driven largely by position adjustments, citing demand outlooks from ASML Holding NV and Taiwan Semiconductor Manufacturing Co. An Amazon Web Services chief financial officer said AWS recoups its investment in AI servers in less than three years and that AI demand is real and spending is sustainable. Scott Rubner of Citadel Securities said he remains constructive on US stocks in the fourth quarter but noted the coming weeks will test market fundamentals.
The next round of earnings reports will be closely watched for evidence that major cloud companies are converting heavier AI investment into profits and cash flow.
VARA was founded last year by former BlackRock executive Ben Hoskin and former Hudson River Trading executive David Field. As of the end of June, it held about $40.1 billion in positions across 123 common stocks and options. Its largest common-stock holdings included Bloom Energy and Nebius at about $1.7 billion each and CoreWeave at about $1.1 billion. AI hardware names including Micron, SanDisk and Seagate were also major investments. The fund recorded a 44% loss in July alone. Those stocks have recently come under pressure, raising concern that losses at one leveraged fund could force selling that spreads to other holders of the same names, since falling prices erode collateral and trigger margin calls.
Separately, Goldman Sachs' hedge fund trading desk said net selling in a global AI stock basket between October 8 and October 14 was the second largest in the past year. It erased all cumulative net buying built up since early last year. Trading was dominated by unwinding existing long positions rather than new short selling, as capital rotated into healthcare and consumer staples.
Financing conditions are adding pressure. Goldman Sachs executive Rich Privorotsky said high capital costs could prevent AI demand from translating into capital investment. In a worst-case scenario, the semiconductor supply chain could face an "order gap" in 2027 and 2028, as higher borrowing costs delay data-center construction and equipment orders even if demand holds.
Other market participants argue it is too early to conclude demand is breaking down. Barclays said recent weakness was driven largely by position adjustments, citing demand outlooks from ASML Holding NV and Taiwan Semiconductor Manufacturing Co. An Amazon Web Services chief financial officer said AWS recoups its investment in AI servers in less than three years and that AI demand is real and spending is sustainable. Scott Rubner of Citadel Securities said he remains constructive on US stocks in the fourth quarter but noted the coming weeks will test market fundamentals.
The next round of earnings reports will be closely watched for evidence that major cloud companies are converting heavier AI investment into profits and cash flow.
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