Institutional
Funds that doubled money on AI stocks in H1 are giving a chunk back in three weeks, and WT China Fund's swing from up 120% to down 17% is the sharpest example of a broader reversal hitting Asia's AI-heavy books
Morgan Stanley's prime brokerage desk flagged renewed volatility in crowded AI positions as Asia-focused funds including Keystone Investors and FengHe Asia gave back gains through mid-July, with SK Hynix and Kioxia both down roughly 28% on the month.
The numbers make the whiplash concrete. WT China Fund, run by Wang Tongshu, was up around 120% in the first half of 2026 and is now down roughly 17% through 17 July. Keystone Investors went from a 63% first-half gain to a 12% loss over the same window. FengHe Asia, CloudAlpha Capital Management and Indus Capital Partners all show similar reversals. Not every fund got caught out the same way, Eagle's View Capital Management actually benefited from the volatility through Japanese convertible-bond arbitrage, a reminder that a rout in one strategy is often an opportunity in another positioned to trade the dislocation rather than ride the trend.
Morgan Stanley's prime brokers put the cause plainly, renewed volatility in crowded AI-related positions, a reversal in momentum strategies, and geopolitical uncertainty. That is a fairly standard unwind mechanism, but the scale of the underlying moves is not standard at all, SK Hynix down about 28% in July and Kioxia down a similar amount and now trading roughly 40% below its peak. Chinese AI names MiniMax Group and Z.AI fell sharply before partially recovering. When memory and semiconductor names move that far that fast, funds that built concentrated positions on the strength of an H1 rally have very little room to be wrong about timing the exit.
The detail that deserves more attention than it is getting is the role of leveraged single-stock ETFs and retail positioning in amplifying the moves. Institutional funds are not just trading against each other here, they are trading in and around a retail-driven leverage layer that adds volatility on the way up and accelerates it on the way down. Rising financing costs for leveraged semiconductor exposure compound that further. This is the same crowding dynamic that has shown up in other AI-thematic corrections this year, just concentrated into a sharper, faster episode because so much of the H1 gain was concentrated in the same handful of names.
The question worth tracking through the rest of Q3 is not whether AI-thematic investing survives this, it clearly will, but whether the funds now sitting on double-digit monthly losses treat this as a buying opportunity in names they still believe in or as a signal to genuinely de-risk concentration going into year-end allocation decisions. A fund that was up 120% and is now up 100% has a very different conversation with its investors than one that just watched a year's worth of alpha evaporate in three weeks, and how that conversation goes will shape how much AI exposure institutional Asia is willing to carry into 2027.
Read the original: Hedgeweek - Funds that doubled money on AI stocks in H1 are giving a chunk back in three weeks, and WT China Fund's swing from up 120% to down 17% is the sharpest example of a broader reversal hitting Asia's AI-heavy books. Commentary is the independent editorial view of Share Trading; the original article is credited to its publisher.