STOCKS | AI-Focused Hedge Fund VARA Plunges 33% in October

Value Aligned Research Advisors (VARA), a hedge fund fully invested in AI-related stocks, plunged 33% last month as AI stocks faced a painful valuation reassessment. According to Sina Finance, citing a person familiar with the matter who requested anonymity, VARA’s portfolio resembles that of Leopold Aschenbrenner’s Situational Awareness fund. VARA told Class C investors that its fund was still up 13% year to date despite the decline; in July, it had at one point plunged 44%. The weeks-long selloff stemmed from growing concerns that technology companies had taken on hundreds of billions of dollars in debt to build larger and more capable AI models, while it remains uncertain whether AI will generate enough profit to cover that debt. The Nasdaq 100 fell 6.7% in October, its steepest decline in nearly a year and a half. The pressure continued this month. On Thursday, the Philadelphia Semiconductor Index, which includes chipmakers such as Nvidia Corp., Intel Corp. and Advanced Micro Devices Inc., plunged 12%, its largest one-day drop since March 2020.