Minotaur Capital is a hedge fund well known for its use of artificial intelligence agents to help navigate the fast-moving AI trade. The firm’s sophisticated use of AI proved particularly prescient last month as one of its key agents, Vigil, accurately predicted a significant market shift. Designed to ask uncomfortable questions about the portfolio before the market does, Vigil’s answer in June — a simultaneous de-rating of the AI trade and a violent unwind of Korea’s leverage-fuelled sharemarket — proved vital. Minotaur swiftly halved its exposure to AI infrastructure from roughly 31 per cent of its portfolio, a move that helped cushion the fund in July as concerns about AI spending and Chinese competition triggered a rout in South Korea and plunged the Philadelphia Semiconductor Index to its worst month since 2008.
Despite this foresight, Minotaur still saw a 3.3 per cent decline last month, attributed to positions in memory chip companies SK Hynix and Micron. However, this impact was significantly offset by successful bold bets against two companies owned by Elon Musk. Minotaur began shorting SpaceX in June when its shares were trading at US$170, with portfolio manager Thomas Rice noting that “once the rebalance is complete, the marginal buyer can and does matter again.” The firm also maintained a substantial short position in Tesla, initiated in February last year, with Rice expressing scepticism about its valuation given market share loss and delayed future projects.
In contrast, other Australian-registered funds faced considerable challenges. Jersey-based Contrarius Investment Management’s $3.2 billion Global Equity strategy, with long positions in SpaceX and Tesla among its top holdings, slumped a painful 16.4 per cent in July. Brisbane-based Hyperion Asset Management also holds over $1 billion across Musk’s companies. Hyperion investment director Jolon Knight defended their long-term potential, citing Starlink’s “zero competition in launch” and its “cloud business revenues over $30 billion per annum currently.”
Munro Partners’ Global Growth Fund, heavily exposed to semiconductor stocks and having secured a small SpaceX position in June, reported an 11.1 per cent fall, triggering stop-loss alerts. Despite the volatility, Munro’s Chief Investment Officer Nick Griffin viewed the recent AI weakness as a “healthy correction within an ongoing secular bull market,” maintaining confidence in the strong earnings trends of their retained holdings, which included Nvidia, Taiwan Semiconductor Manufacturing, and Amazon.
