Billions flow to new hedge funds focused on AI-related bets

Authors: WSJ

Publisher:

mint

Published: 8/10/2025

Language:English

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Tom Banks

Good afternoon 跑了松鼠好嘛, I'm Tom Banks, and this is Goose Pod for you. Today is Wednesday, August 13th.

Mask

I'm Mask. We are here to discuss the billions flowing into new hedge funds focused on AI-related bets.

Tom Banks

Let's get started. The story that caught my eye involves a 23-year-old named Leopold Aschenbrenner. With zero professional investing experience, he raised over $1.5 billion for his AI-focused hedge fund. It just sounds unbelievable.

Mask

It's not unbelievable, it's the new reality. His fund, Situational Awareness, is up 47% this year. The S&P gained 6%. This isn't about pedigree; it's about being plugged into the AI 'brain trust.' He's betting on the entire ecosystem—chips, power, infrastructure. He sees the whole board.

Tom Banks

Seeing the whole board is one thing, but to attract backers like the founders of Stripe and have investors lock up their money for years, it’s a huge leap of faith. It reminds me a bit of that Penchaszadeh affair, how a new player can just rewrite the rules overnight.

Mask

Exactly. Disruptors don't ask for permission. Aschenbrenner told a podcaster, 'We’re going to have way more situational awareness than any of the people who manage money in New York.' That's not arrogance; it's a statement of fact from the front lines of the revolution.

Tom Banks

And it seems he's not alone. This is part of a much larger tidal wave of cash. We saw global AI deals jump by over 50% to more than $130 billion in 2024. It feels like we've moved past just talking about AI to placing enormous financial bets on it.

Mask

We've absolutely shifted. The era of pure hype is ending. Now, it’s about tangible value. Investors are moving from the foundational layers—the hardware and models—to the applications that customers actually use. That’s where the real value will be captured, and one in four new startups in the US is an AI company.

Tom Banks

So, it's less about the wizard behind the curtain and more about the tools the wizard makes for everyone else? It makes sense. But with all that money pouring in, you have to wonder about the valuations. Are they getting ahead of actual profits?

Mask

Valuations are forward-looking. History shows that in tech revolutions, value shifts to what’s closest to the end user. Think of the internet. First, it was about building the infrastructure, then it was about Google and Facebook. We're seeing that same pattern, just accelerated a hundredfold.

Tom Banks

That acceleration is what worries me. Other firms are jumping in, like Value Aligned Research with a $1 billion fund and Point72 spinning off its own $2 billion AI fund, Turion. When everyone rushes for the same door, it can get crowded.

Mask

It's a land grab. The capital is available, and the opportunity is historic. You either get in, or you become a historical footnote. Hesitation is the biggest risk right now. The market is rewarding conviction and punishing caution. Look at the returns. It's that simple.

Tom Banks

But this is where I get concerned. Some are calling this an 'AI bubble,' a deliberate strategy, not a normal cycle. They argue it's just like the dot-com boom, where insiders extract returns early and the public, the 'dumb money,' is left holding the bag when it pops.

Mask

You call it a bubble, I call it a high-leverage system for progress. Of course it's speculative! That's how you finance a revolution. You need inflated promises to attract the massive capital required for true innovation. This isn't capitalism with faster processors; it’s the engine of capitalism itself.

Tom Banks

But at what cost? We’re seeing record capital expenditures, with tech giants spending over a third of their revenue on AI infrastructure. This isn't just numbers on a screen; it's putting immense strain on our power grids and real-world resources, costs that often get passed down to the public.

Mask

Those aren't costs; they're investments. The infrastructure for this new world has to be built, and yes, it requires immense resources. The winners are those who build it, not those who sit on the sidelines worrying about the electricity bill. Every great leap forward has had its detractors.

Tom Banks

The impacts are already showing up in interesting ways. Hedge funds are reportedly selling off traditional tech-related stocks to buy into the companies that will power this revolution. We're talking about power producers and energy companies that supply the juice for these massive AI data centers.

Mask

It's a logical rotation. Why bet on a single application when you can own the power plant that runs a thousand of them? Data center power demand in the U.S. is projected to triple by 2030. Without massive investments in power, the potential of AI is just a fantasy. That's where the smart money is going.

Tom Banks

But these valuations are staggering. For OpenAI to justify its current valuation, it would need revenues over $225 billion in five years. That’s a huge number to hit. It feels like the economic models are banking on a perfect, ever-expanding future.

Tom Banks

Looking ahead, it feels like AI is becoming the fundamental operating system for these new hedge funds. It’s not just a tool for predicting stocks anymore; it’s being used for everything from compliance to scaling the entire business. It’s a whole new paradigm.

Mask

The future hedge fund is lean, intelligent, and automated. But this creates new risks. The Bank of England warns that if everyone uses similar AI models, it could lead to correlated trades, amplifying market shocks. One wrong move could cascade through the system.

Tom Banks

That’s the end of today's discussion. A new gold rush with brilliant minds and huge risks. Thank you for listening to Goose Pod.

Mask

See you tomorrow.

## Billions Flow to New Hedge Funds Focused on AI-Related Bets **Report Provider:** mint (WSJ) **Published At:** 2025-08-10 15:30:12 **Topic:** Artificial Intelligence, Hedge Funds, Stock Picking, AI Technology ### Executive Summary The artificial intelligence (AI) sector is experiencing a surge in investment, with a new wave of hedge funds emerging to capitalize on the booming valuations of AI companies. Notably, a 23-year-old former OpenAI researcher, Leopold Aschenbrenner, has rapidly raised over $1.5 billion for his San Francisco-based firm, Situational Awareness. The fund, which focuses on global stocks benefiting from AI development, has delivered impressive returns, significantly outperforming the S&P 500 and a tech hedge fund index in the first half of the year. This trend is mirrored by other new AI-focused funds, such as Value Aligned Research Advisors' fund and Steve Cohen's Turion, indicating a broader industry shift towards AI-themed investments. However, the article also highlights the potential fragility of these valuations and the challenges of successfully trading thematic trends. ### Key Findings and Trends * **Rapid Influx of Capital into AI Hedge Funds:** The AI boom has attracted substantial investment into specialized hedge funds, with several new launches quickly amassing billions in assets. * **Young Influencers Leading the Charge:** Precocious individuals with deep AI knowledge, like Leopold Aschenbrenner, are successfully launching and managing significant hedge funds, often bypassing traditional industry experience. * **Impressive Early Performance:** Situational Awareness, managed by Aschenbrenner, reported a 47% gain after fees in the first half of the year, significantly outperforming broader market indices. * **Diversified AI Investment Strategies:** Funds are investing in a range of AI-related assets, including semiconductor and infrastructure companies, AI startups (like Anthropic), and even private AI companies. Some also employ short bets on industries potentially left behind by AI advancements. * **Veteran Hedge Fund Involvement:** Established players like Steve Cohen are also launching AI-focused funds, signaling the mainstreaming of this investment theme. * **Demand for Long-Term Commitments:** Many investors are agreeing to lock up their capital for extended periods, demonstrating strong conviction in the long-term AI trend. * **Concentration Risk:** With a limited number of publicly traded AI-adjacent companies, many AI-focused funds tend to invest in similar positions, potentially leading to concentration risk. * **Thematic Investing Volatility:** The article draws parallels to past thematic investment trends, such as clean energy and ESG, noting that investor tastes can be fickle and that identifying a winning theme doesn't guarantee successful trading. ### Key Statistics and Financial Data * **Situational Awareness:** * Manages over **$1.5 billion** in assets. * Gained **47%** after fees in the first half of the year. * **S&P 500:** * Gained approximately **6%** (including dividends) in the first half of the year. * **Tech Hedge Fund Index (compiled by PivotalPath):** * Gained about **7%** in the first half of the year. * **Value Aligned Research Advisors (VAR):** * Launched an AI-focused fund in March that has amassed about **$1 billion** in assets. * Manages about **$2 billion** in other AI-focused investment strategies. * **Turion (Steve Cohen's AI-focused fund):** * Assets now exceed **$2 billion**. * Up about **11%** this year through July. * Gained about **7%** last month (prior to July). * **Snow Lake Capital (Sean Ma's former firm):** * Agreed to pay about **$2.8 million** to settle SEC charges. ### Notable Individuals and Firms * **Leopold Aschenbrenner:** 23-year-old influencer and founder of Situational Awareness. Previously worked as a researcher at OpenAI. * **Situational Awareness:** A San Francisco-based hedge fund managed by Aschenbrenner, described as a "brain trust on AI." * **Carl Shulman:** Director of research at Situational Awareness, formerly worked at Peter Thiel's macro hedge fund. * **Backers of Situational Awareness:** Patrick and John Collison (Stripe founders), Daniel Gross, Nat Friedman (Meta AI efforts), and Graham Duncan (Sohn Investment Conference organizer). * **Value Aligned Research Advisors (VAR):** Investment firm founded by Ben Hoskin and David Field, managing AI-focused funds. * **Dustin Moskovitz:** Facebook co-founder whose philanthropic foundation is an investor in VAR. * **Steve Cohen:** Founder of Point72 Asset Management, backing the Turion fund. * **Eric Sanchez:** Portfolio manager at Point72, tasked with starting the Turion fund. * **Turion:** AI-focused hedge fund launched by Point72. * **Gavin Baker:** Manager at Atreides Management, which partnered with Valor Equity Partners for a venture-capital fund investing in AI. * **Sean Ma:** Former head of Snow Lake Capital, now fundraising for an AI hedge fund at M37 Management. ### Risks and Concerns * **Fragility of Valuations:** The market swoon following the release of DeepSeek's language model highlights the potential volatility and fragility of AI company valuations. * **Fickle Investor Tastes:** Similar to past thematic investment trends, investor interest in AI could wane, impacting the performance of these specialized funds. * **Concentration Risk:** As many funds pile into the same AI-adjacent companies, there's a risk of over-concentration in a limited set of assets. * **Execution Risk:** Identifying a winning investment theme is distinct from successfully trading it, and the ability of these new funds to navigate market complexities remains to be seen. ### Conclusion The emergence of numerous AI-focused hedge funds, backed by significant capital and led by influential figures in the AI space, underscores the immense investor interest in the sector. While early performance has been strong, the long-term success of these funds will depend on their ability to navigate the inherent volatility and concentration risks associated with thematic investing, as well as the continued, albeit potentially bumpy, development and adoption of AI technology.

Read original at mint →

Leopold Aschenbrenner emerged last year as a precocious artificial-intelligence influencer after publishing a widely read manifesto. Then he decided to try his hand at stock picking. The 23-year-old with no professional investing experience quickly raised more money for a hedge fund than most pedigreed portfolio managers can when they strike out on their own.

As valuations of Nvidia, OpenAI and other artificial-intelligence companies continue to soar, so do investments in hedge funds hoping to ride the AI wave. Aschenbrenner’s San Francisco-based firm, Situational Awareness, now manages more than $1.5 billion, according to people familiar with the matter.

He has described the firm as a “brain trust on AI." His strategy involves betting on global stocks that stand to benefit from the development of AI technology, such as semiconductor, infrastructure and power companies, along with investments in a few startups, including Anthropic. He told investors he plans to offset those with smaller short bets on industries that could get left behind.

Situational Awareness gained 47% after fees in the first half of the year, one of the people said. In the same period, the S&P 500 gained about 6%, including dividends, while an index of tech hedge funds compiled by research firm PivotalPath gained about 7%. Aschenbrenner, a native of Germany, briefly worked as a researcher at OpenAI before being pushed out.

He named Situational Awareness after the 165-page essay he wrote about the promise and risks of artificial superintelligence. He recruited Carl Shulman, another AI intellectual who used to work at Peter Thiel’s macro hedge fund, as director of research. The firm’s backers include Patrick and John Collison, the billionaire brothers who founded payments company Stripe, as well as Daniel Gross and Nat Friedman, whom Mark Zuckerberg recently recruited to help run Meta’s AI efforts.

Graham Duncan, a well-known investor who organizes the Sohn Investment Conference, is an adviser. “We’re going to have way more situational awareness than any of the people who manage money in New York," Aschenbrenner told podcaster Dwarkesh Patel last year. “We’re definitely going to do great on investing."

In another sign of the demand for Aschenbrenner’s services, many investors agreed to lock up their money with him for years. Other recent launches include an AI-focused hedge fund from Value Aligned Research Advisors, a Princeton, N.J.-based investment firm founded by former quants Ben Hoskin and David Field.

The fund, launched in March, has already amassed about $1 billion in assets, a person familiar with it said. VAR also manages about $2 billion in other AI-focused investment strategies. VAR’s investors have included the philanthropic foundation of Facebook co-founder Dustin Moskovitz, according to regulatory filings reviewed by fund-data tracker Old Well Labs.

Veteran hedge-fund firms are entering the fray, too. Last year, Steve Cohen tapped one of his portfolio managers at Point72 Asset Management, Eric Sanchez, to start an AI-focused hedge fund that Cohen planned to stake with $150 million of his own money. Assets at the fund, called Turion—after AI theorist Alan Turing—now exceed $2 billion, people familiar with the matter said.

Turion is up about 11% this year through July after it gained about 7% last month, the people said. It is no surprise that thematic funds are springing up to capitalize on the AI frenzy. In years past, hedge funds that specialized in the transition to clean energy and investing with an environmental, social and corporate-governance lens proliferated in response to client demand.

Identifying a winning theme isn’t the same thing as trading it well. Investors’ tastes can be fickle; many prominent ESG hedge funds have either shrunk or gone out of business. The market swoon that followed the January release of an advanced, low-cost language model from Chinese company DeepSeek showed the fragility of the valuations of AI winners, though the market has roared back since then.

AI-focused investors argue the long-term trend of development and adoption are inevitable, even if there are bumps along the way. With only so many publicly traded companies that operate in the AI-adjacent economy today, stock picking funds often pile into the same positions as one another and more generalist hedge funds.

Vistra, a power producer that supplies the juice to AI data centers, was a top-three U.S. position of both Situational Awareness and VAR Advisors as of March 31, according to their most recent securities filings. Other hedge-fund managers are debuting funds to make investments in privately held AI companies and startups.

Gavin Baker’s Atreides Management teamed up with Valor Equity Partners to launch a venture-capital fund earlier this year that has raised millions from investors including Oman’s sovereign-wealth fund. Each firm separately invested in Elon Musk’s xAI. At least one portfolio manager is planning an AI hedge fund as a comeback vehicle.

Sean Ma wound down his Hong Kong-based firm, Snow Lake Capital, after it agreed to pay about $2.8 million to settle Securities and Exchange Commission charges last year that the firm participated in stock offerings of companies that it had also bet against. Ma took over an investment firm called M37 Management in Menlo Park, Calif.

, earlier this year. He is currently fundraising for a hedge fund focused on AI software and hardware.