Hedge funds recently holding NVIDIA face a difficult time

Rokos Capital Management had a stellar 2024, delivering a 34% return and paying someone ￡110m in the year to March. But 2025 is off to a shakier start according to eFinacialcareers.

The fund, like many others, has been a major backer of NVIDIA, whose stock is down 11.5% in pre-market trading as of January 27th. As of September 2024, Rokos held $146m in NVIDIA shares, far less than funds like Hudson Bay and Sands Capital Management, which had billions invested. Other tech stocks, including Broadcom and Taiwan Semiconductor, are also tumbling.

The sell-off was triggered by Chinese AI startup Deepseek, which last week released an open-source model it claims required just 10,000 NVIDIA chips to develop far fewer than the tens of thousands previously thought essential. NVIDIA’s valuation, built on accelerating chip sales, is now under scrutiny, though some suspect Deepseek may be understating its chip usage.

Until now, NVIDIA bets paid off handsomely for hedge funds, with Rokos reportedly earning $60m last February when shares surged. But with tech stocks under pressure and hedging strategies limited, job losses at hedge funds could follow.

This could mark either a brief setback for NVIDIA or the start of a broader tech stock downturn. With firms like Blackstone, Pimco, and BlackRock reportedly lending $11bn to tech firms using NVIDIA chips as collateral, the stakes are high.