One of Wall Street's Best Hedge Funds Just Blew a 44% Gain Because of AI Bets

Lone Pine Hedge Fund Loses 44% Gain Due to AI Bets

Recent Performance

Lone Pine Capital is historically considered one of Wall Street's most successful and prominent hedge funds. However, its recent performance has experienced sharp ups and downs. July did most of the damage. Cypress lost nearly 25% that month as AI and tech stocks sold off. Tensions involving Iran and a spike in oil prices made the rout worse.

Biggest Bets

The timing was brutal. Lone Pine bought five of its seven biggest US stock positions in the second quarter, according to figures cited by Hedgeweek. Together, they made up about 40% of its US portfolio. The biggest was Nebius Group, a Dutch company that rents out AI computing power. Lone Pine held about $1.18 billion of it. The stock fell nearly a third in July.

Short Selling

Q3 share-price falls for Applied Materials, Nebius Group and Seagate, top Lone Pine hedge fund holdings Applied Materials, which makes chipmaking machines, dropped 29%. ASML, AppLovin, Corning, and Home Depot also fell. Cypress also bets on some stocks falling, a tactic called short selling. Those bets lost money too.

Industry Impact

Lone Pine gave it all back after being up 44% through the first half of the year. Gotta be real tough to explain this to the LPs," stock trader Negligible Capital remarked. Big Investors Are Split on the AI Trade Lone Pine is not the only big name burned by AI. In July, AI bets nearly sank former OpenAI researcher Leopold Aschenbrenner's hedge fund. He has since bought back into AI stocks. Michael Burry, the investor made famous by "The Big Short," is betting the other way. He holds put options on Nebius, contracts that pay off if the stock falls. He explained the shift in a September 28 post. "Fundamentally, I am moving timelines up," Burry noted. Lone Pine's biggest AI bet is now one of Burry's targets.