AI Hedge Fund VARA Lost 33% in October Selloff

Value Aligned Research Advisors, a Princeton, New Jersey-based hedge fund heavily exposed to artificial intelligence stocks, lost 33% in October. The fund remained up 13% year to date, according to performance details provided to investors holding its Class C shares.

The October loss followed a 44% decline in July. The fund’s results reflect sharp price swings in strategies that use concentrated positions and leverage to invest in AI-related companies.

Technology stocks fell as investors questioned whether spending on large-scale AI systems would generate enough profit and how much debt companies would need to finance data centers, chips and other infrastructure. The Nasdaq 100 fell 6.7% in October, its biggest monthly decline in more than 18 months.

Selling also spread across chipmakers. The Philadelphia Semiconductor Index fell 12% on Thursday, adding to losses among companies that supply hardware for AI systems.

In a letter to investors, VARA reported no material changes in its counterparty relationships and said it maintained excess margin. Portfolio leverage was at the lower end of its historical range, the firm said.

Leopold Aschenbrenner’s Situational Awareness has an investment approach similar to VARA’s and reached about $45 billion in assets within two years. The fund unwound positions after margin calls during the July technology selloff and sold AI-related holdings to Citadel at a discount.