The biggest trading loss list in history updated: $35 billion AI gamble tops the chart, Jane Street and other huge loss cases emerge

Zhitong Finance APP has learned that the outline of the world’s largest trading losses is gradually becoming clearer. According to a ranking of losses compiled by the market—“The 25 Biggest Trading Losses in History”—a $35 billion loss in July this year, related to leveraged AI stock bets, has jumped to the top of the list. The ranking shows that only 7 of the cases involved hedge funds, while banks and corporations make up the majority of the major blow-up events.

The ranking clearly reveals how leverage, concentrated positions, and high-conviction trades can amplify relatively moderate market fluctuations into tens of billions of dollars in massive losses.

At the top of the list is a $35 billion loss related to “Situational Awareness,” followed by a loss of about $14 billion at Morgan Stanley and around $13 billion at JPMorgan Chase.

Situational Awareness, which became a “star AI fund” on Wall Street earlier this year, was founded by former OpenAI researcher Leopold Aschenbrenner. In the first half of the year, it bet on AI-related stocks and achieved astonishing returns, leading to rapid growth in assets under management. However, in July, AI-related stocks were heavily sold off, highly leveraged positions quickly deteriorated, and the fund faced margin calls.

Ultimately, Situational Awareness was forced to liquidate large amounts of public equities and sold most of its stock portfolio to Citadel, owned by billionaire Ken Griffin.

According to statistics, other major loss cases include: Archegos Capital Management with about $12.5 billion, Société Générale with about $11.3 billion, Amaranth Advisors with about $10.7 billion, and Long-Term Capital Management with about $9.5 billion in losses.

The list also points out that interpretations of these rankings should be approached with caution, especially for investment funds. Even a relatively small percentage drawdown for a large asset management company can result in a tens-of-billions loss on the books due to their enormous asset scale.

For example, Millennium Management manages around $89 billion in assets, which means just over a 2% drop could translate into a loss of about $2 billion. The list also notes that Tiger Global’s roughly $40 billion loss in 2022 was not included, which is a significant omission—if counted, it would top the list.

In addition, Jane Street is also likely to make the top of the list. The company reportedly suffered an impact of about $15 billion due to AI-related trading exposures, but there is still an ongoing debate about whether the market maker should be partly classified as a hedge fund.

According to multiple media reports, Jane Street suffered a loss of around $15 billion in July of this year. If this is accurate, it would be the company’s first single-month loss in around a decade. This loss was mainly related to its investment in the AI-focused hedge fund Situational Awareness, which blew up, as well as sharp turbulence in technology stocks during the same period.

In a memo, Jane Street stated: “We lost largely on the same set of trade portfolios, and those trades had delivered a strong excess return in the second quarter.” The company specifically pointed out that in July, AI-exposed stocks fell sharply, and some of the largest exposures among storage chip and semiconductor stocks plunged by about 50%.