Jane Street took a $15 billion hit in July from its exposure to AI-focused hedge fund Situational Awareness and other tech stocks that were battered by the market selloff, according to two people familiar with the matter and a note seen by Reuters.
The secretive Wall Street trading giant, however, has generated trading revenue of more than $40 billion year to date, one of the sources said, easily outstripping trading revenue at the largest banks and other market-making rivals.
In July, Situational, which is run by Leopold Aschenbrenner, nicknamed the “Nostradamus of AI” and a former OpenAI researcher, offloaded the bulk of its stock portfolio in what was a fire sale to billionaire Ken Griffin’s Citadel after being hurt by the AI selloff that triggered margin calls at the firm.
Situational counts Jane Street among its investors.
In a note to employees on Friday, executives at Jane Street said July was a “bad month” for the firm, blaming the drawdown at Situational for contributing to its poor performance during the month.
“We have an investment in Situational Awareness, an externally managed AI-focused hedge fund, that became large by performing well in the first half of the year. They had a large drawdown that left our stake about flat on the year, but still up over the entire period we have been invested,” according to the note to employees that was seen by Reuters.
The firm also took a hit from its long positions in non-AI stocks in Asia, many of which had outperformed the markets earlier during the year.
“We largely lost on the same portfolio of trades that had strong outperformance in the second quarter. AI-exposed stocks were down a lot during July, several of the largest memory and semiconductor stocks were down around 50%,” Jane Street said in the note.
Jane Street said it would be “more selective” about risk, adding that the firm has “closed a significant portion of our risk in the specific areas we lost on in July, and have also reduced risk taking in other strategies.”
Jane Street could not be immediately reached for comment.