The trading firm Jane Street reported a $15 billion loss in July due to its exposure to technology stocks and an AI-focused hedge fund, according to people familiar with the matter and an internal note. Despite this monthly loss, the firm has generated more than $40 billion in trading revenue for the year to date, surpassing the $39.6 billion it recorded for all of last year.
The losses were driven by a market selloff that impacted Jane Street's investment in Situational Awareness, a hedge fund managed by former OpenAI researcher Leopold Aschenbrenner. Situational Awareness was forced to sell the majority of its stock portfolio to Citadel after facing margin calls—demands from lenders for additional collateral to cover investment losses—during a downturn in artificial intelligence-related equities.
In a note to employees, Jane Street executives described July as a "bad month," noting it was the firm's first negative month for trading revenue since 2016. The firm stated that its short-term hedges, such as put options designed to protect against sharp price drops, were ineffective because the losses in AI stocks were spread out across the month. Additionally, long positions in non-AI stocks in Asia, including memory and semiconductor companies that fell approximately 50%, contributed to the decline.
The impact of this market shift extends to the broader financial sector, as Jane Street is a primary provider of liquidity for exchange-traded funds (ETFs), bonds, and currencies. A pullback in risk-taking by a major market maker can influence how easily other investors can buy or sell these assets. The firm’s experience mirrors a wider trend in the industry; several other prominent hedge funds reported similar drawdowns in July as the market demand for AI-related technology stocks decreased.
Moving forward, Jane Street executives informed staff that they have already exited the specific areas that caused the July losses. The firm stated that its current positions are now aligned with its updated risk tolerance. While the specific names of all affected Asian stocks were not disclosed, the firm noted that trading in its shorter-term strategies remains profitable. No specific dates for further portfolio adjustments were provided, but the firm indicated it will maintain a more selective approach to risk in the immediate term.