Another AI Fund Crashes: Whale Rock Capital Loses 21.7% in July

Whale Rock Capital, a Boston-based investment fund founded by Alex Sacerdote, suffered a 21.7% decline in July, erasing half a year's gains. The fund had previously posted a 72.5% return in the first half of the year, but after July its year-to-date return dropped to 35.1%. The crash was part of a broader AI-driven selloff in July, triggered by worries about the return on AI infrastructure investments. Memory chip stocks like SK Hynix fell nearly 40% from June highs, while SanDisk, Micron, and CoreWeave dropped over 30% in a month. Even Amazon and Google saw slight declines, while software stocks like Adobe rebounded. Other AI-focused funds also suffered: Turion fell 11.4%, Coatue's hedge fund lost 8.3% (its worst month in over a year), and Eureka dropped 6.9%. The article suggests that the narrative around AI and AGI is weakening, especially as open-source models like K3 and V4 Flash emerge, undermining the rationale for massive infrastructure spending. It also mentions the earlier collapse of a 24-year-old AI hedge fund manager, Leopold Aschenbrenner, whose fund 'Situational Awareness' blew up due to high leverage, after a 439% return in the first half. The article concludes by reflecting on the madness of AI investment mania.