Jane Street Suffers $15 Billion Loss as AI Selloff Triggers Hedge Fund Collapse

Jane Street took $15 billion hit in July tied to Situational Awareness, AI selloff, sources say

In July, Jane Street suffered a staggering $15 billion loss amid a challenging AI-driven stock market downturn. Despite this setback, the firm has accrued more than $40 billion in revenue this year, putting it ahead of competitors. Meanwhile, AI hedge fund Situational Awareness made the tough call to liquidate its stock holdings following margin calls. Jane Street took a $15 billion hit in July from its exposure to AI-focused hedge fund Situational Awareness and other tech stocks that were battered by the market selloff, according to two people familiar with the matter and a note seen by Reuters. The secretive Wall Street trading firm, however, has generated trading revenue of more than $40 billion year to date, one of the sources said, easily outstripping trading revenue at the largest banks and other market-making rivals. That total is ⁠more than the $39.6 ⁠billion that Jane Street generated for all of last year. In July, Situational, which is run by Leopold Aschenbrenner, a former OpenAI researcher, offloaded the bulk of its stock portfolio in what was a fire sale to billionaire Ken Griffin's Citadel after being hurt by the AI selloff that triggered margin calls at the firm. Situational counts Jane Street among its investors. In a note to employees on Friday, executives at Jane Street said July was a "bad month" for the firm, blaming the drawdown at Situational for contributing to its poor performance during the month. US MarketsPowered By As on 15 Aug 2026, 01:30 AM IST S&P 500 Top Gainers Copart31.61(7.55%) Advanced Micro Devices514.39(6.50%) Fox61.41(5.70%) Seagate Technology Hldgs973.44(5.65%) Gainers" S&P 500 Top Losers Coterra Energy32.56(-8.62%) Broadcom392.99(-5.94%) GoDaddy94.91(-5.56%) Applied Materials507.18(-5.12%) Losers" "We have an investment in Situational Awareness, an externally managed AI-focused hedge fund, that became large by performing well in the first half of the year. They had a large drawdown that left our stake about flat on the year, but still up over the entire period we have been invested," according to the note to employees that was ⁠seen by Reuters. "We generally worry most about sharp drawdowns, and buy puts that would help in those scenarios. The losses in AI stocks were relatively spread out throughout the month, so those short-term hedges provided little help," the note added. The firm also took a hit from its long positions in non-AI stocks in ⁠Asia, many of which had outperformed the markets earlier in the year. "We largely lost on the same portfolio of trades that had strong outperformance in the second quarter. AI-exposed stocks were down a lot during July, several of the largest memory and semiconductor stocks were down around 50%," Jane Street said in the note. Jane Street did not respond to a request for comment. 'MORE SELECTIVE ABOUT RISK'The latest disclosures from Jane Street underscore the extent of the steep losses that the selloff inflicted on Wall Street's biggest financial firms. The July loss meant that the firm recorded its first negative month of trading revenue since 2016, while its revenue is down roughly 25% from its peak at the end of June, the firm said in the note. Reuters reported earlier in August that several of the world's most prominent hedge funds were rocked by drawdowns due to their exposure to the AI trade. Jane Street, which has about 3,500 employees and was launched in 2000, provides market liquidity by buying and selling a range of financial products, including ETFs, equities, bonds, options, commodities and currencies on exchanges and trading venues worldwide. The firm, which to date has not taken on any outside capital, currently has direct market access to more than 200 trading venues across the globe. Jane Street's capital structure allows the firm ⁠to take larger positions when providing liquidity and hold such positions through periods when such risks pay off. Over the past few years, Jane Street has grown to become a market-making juggernaut, gaining an edge through real-time pricing tools that have been built over 25 years by leveraging data and research. Still, Jane Street was not immune to the unwinding of the AI trade despite its dominance, as the July losses forced it to exit several of its riskiest positions in recent weeks - a fact that it acknowledged in its note to employees. "Despite the large year to date increase in trading capital, the recency of these losses has caused us to locally be more selective about risk," the note said. Jane Street said it closed a significant portion of risk in the specific areas where the firm lost money in July, while also having pulled back on risk-taking in other strategies. "Our positions currently seem appropriate for our present risk tolerance," the note said. "Market volumes have been strong, and we've continued to make improvements to our short time horizon strategies, that trading seems more profitable than ever," it added.

'Nostradamus of AI' blamed for massive $15B loss at secretive trading giant Jane Street

Jane Street took a $15 billion hit in July from its exposure to AI-focused hedge fund Situational Awareness and other tech stocks that were battered by the market selloff, according to two people familiar with the matter and a note seen by Reuters. The secretive Wall Street trading giant, however, has generated trading revenue of more than $40 billion year to date, one of the sources said, easily outstripping trading revenue at the largest banks and other market-making rivals. In July, Situational, which is run by Leopold Aschenbrenner, nicknamed the "Nostradamus of AI" and a former OpenAI researcher, offloaded the bulk of its stock portfolio in what was a fire sale to billionaire Ken Griffin's Citadel after being hurt by the AI selloff that triggered margin calls at the firm. Situational counts Jane Street among its investors. In a note to employees on Friday, executives at Jane Street said July was a "bad month" for the firm, blaming the drawdown at Situational for contributing to its poor performance during the month. "We have an investment in Situational Awareness, an externally managed AI-focused hedge fund, that became large by performing well in the first half of the year. They had a large drawdown that left our stake about flat on the year, but still up over the entire period we have been invested," according to the note to employees that was seen by Reuters. The firm also took a hit from its long positions in non-AI stocks in Asia, many of which had outperformed the markets earlier during the year. "We largely lost on the same portfolio of trades that had strong outperformance in the second quarter. AI-exposed stocks were down a lot during July, several of the largest memory and semiconductor stocks were down around 50%," Jane Street said in the note. Jane Street said it would be "more selective" about risk, adding that the firm has "closed a significant portion of our risk in the specific areas we lost on in July, and have also reduced risk taking in other strategies." Jane Street could not be immediately reached for comment.

Jane Street takes $15 billion hit following tech sell-off, FT reports By Investing.com

Investing.com -- Proprietary trading heavyweight Jane Street sustained a roughly $15 billion loss in July after being caught off guard by aggressive market ructions and the implosion of an artificial intelligence-focused hedge fund. The rare stumble for the famously profitable firm was initially reported by the Financial Times, highlighting the far-reaching collateral damage of the summer's sudden tech sector volatility. Despite absorbing the massive July deficit, the trading giant's broader financial trajectory continues to reflect strong operational resilience. Jane Street has still amassed more than $40 billion in net trading revenues in the year to Friday, according to FT, a staggering haul that easily eclipses its total revenues for the entirety of 2025. Analyze the news by upgrading to InvestingPro - get 55% off today The unprecedented trading reversal was recently disclosed to lenders as the New York-based firm executes a significant capital structure reorganization. Management is actively shifting approximately $11 billion of its public debt pile into the hands of private investors, enlisting institutional heavyweights such as Pimco to absorb the obligations. The firm's July headwinds materialized during a particularly tumultuous stretch for US semiconductor and AI infrastructure equities. A swift and brutal market sell-off abruptly derailed a powerful sector-wide rally that had otherwise dominated the trading landscape throughout the first half of 2026. This severe downdraft triggered acute distress across several highly levered AI-centric hedge funds, culminating in the high-profile collapse of Situational Awareness. Run by 24-year-old Leopold Aschenbrenner, the fund, which notably counted Jane Street among its financial backers, saw its assets plunge from a $45 billion peak to roughly $10 billion within a single month. Buckling under extreme leverage and relentless margin calls, Situational Awareness was ultimately pushed into a forced liquidation of its core holdings. The distressed fund abruptly offloaded its entire publicly traded equity portfolio in a massive block sale to Ken Griffin's Citadel, underscoring the severe liquidity pressures that defined the July reckoning.

Jane Street took $15 billion hit in July tied to Situational Awareness, AI selloff, sources say

NEW YORK, Aug 14 (Reuters) - Jane Street took a $15 billion hit in July from its exposure to AI-focused hedge fund Situational Awareness and other tech stocks that were battered by the market selloff, according to two people familiar with the matter and a note seen by Reuters. The secretive Wall Street trading giant, however, has generated trading revenue of more than $40 billion year to date, one of the sources said, easily outstripping trading revenue at the largest banks and other market-making rivals. In July, Situational, which is run by Leopold Aschenbrenner, a former OpenAI researcher, offloaded the bulk of its stock portfolio in what was a fire sale to billionaire Ken Griffin's Citadel after being hurt by the AI selloff that triggered margin calls at the firm. Situational counts Jane Street among its investors. In a note to employees on Friday, executives at Jane Street said July was a "bad month" for the firm, blaming the drawdown at Situational for contributing to its poor performance during the month. "We have an investment in Situational Awareness, an externally managed AI-focused hedge fund, that became large by performing well in the first half of the year. They had a large drawdown that left our stake about flat on the year, but still up over the entire period we have been invested," according to the note to employees that was seen by Reuters. The firm also took a hit from its long positions in non-AI stocks in Asia, many of which had outperformed the markets earlier during the year. "We largely lost on the same portfolio of trades that had strong outperformance in the second quarter. AI-exposed stocks were down a lot during July, several of the largest memory and semiconductor stocks were down around 50%," Jane Street said in the note. Jane Street said it would be "more selective" about risk, adding that the firm has "closed a significant portion of our risk in the specific areas we lost on in July, and have also reduced risk taking in other strategies." Jane Street could not be immediately reached for comment. (Reporting by Anirban Sen in New York; Editing by Megan Davies and Lisa Shumaker)