There’s no escape from the AI whipsaw

Such swings were enough to claim casualties. Hedge fund Situational Awareness, run by ex-OpenAI wunderkind Leopold Aschenbrenner, was forced to sell off its public equity positions in the face of margin calls, CNBC reported. The Korean government said that it would crack down harder on high-leverage products that have fed into wild market volatility.

It underscores how concentrated risks have become. More than half of the S&P 500’s market capitalization is represented by companies driving the AI wave. Korea and Taiwan, central to the tech supply chain, account for 51% of the MSCI Emerging Markets index.

This has nurtured a giant trend of buying stocks that are already going up. The MSCI USA Momentum index outperformed broader equities to an unprecedented extent between March and June, and has now plummeted just as quickly. Yet a lot of it reflects investors rotating their money within a closed circuit of hyperscalers, chipmakers and server farmers, which are furiously competing to spend as much as possible in the hopes that all of them will simultaneously make good on the investment.