Hedge Funds Target U.S. Market for Collapse Amid Trump’s Return
Hedge funds have turned against the U.S. economy, betting on a market collapse under President Donald Trump. Data from Goldman Sachs reveals that short positions against U.S. stocks surged tenfold in January, reflecting widespread fears of economic instability. Analysts warn that these actions put 401(k) accounts, pensions, and household savings at significant risk.
Bruno Schneller, managing partner at Erlen Capital Management, explained, “The increase in short bets against U.S. stocks likely reflects concerns about macroeconomic uncertainty.” This shift highlights a growing lack of confidence in Trump’s policies and their impact on the financial sector.
Tech Giants Crumble Under DeepSeek’s Disruption
The collapse of tech stocks intensified market fears. DeepSeek, an AI chatbot developed by China’s High Flyer, triggered a sell-off that wiped $600 billion in value from tech giants such as Nvidia, Microsoft, and Meta. Nvidia alone experienced an 18% drop in stock price, marking one of the most significant losses in a single day.
Marc Andreessen, a major investor, described the rise of DeepSeek as “AI’s Sputnik moment,” drawing parallels to the technological shock during the Cold War. Trump’s AI advisor, David Sacks, expressed concerns about competition, stating, “We cannot be complacent.”
DeepSeek’s success has fueled suspicion over U.S. tech investments. High Flyer claims that it achieved these advancements using minimal resources, undermining the assumption that large infrastructure investments are required to lead in AI technology. Analysts believe this may weaken demand for microchips that have driven U.S. tech growth.
Hedge Funds Abandon Earlier Optimism in Trump’s Policies
The short-selling frenzy reflects a dramatic reversal in hedge fund sentiment. Following Trump’s re-election, fund managers had embraced his tax cuts, tariffs, and deregulation policies, anticipating strong market growth. Hedge fund assets soared to $4.5 trillion as investors sought to capitalize on these policies.
Prominent figures such as Ken Griffin of Citadel and Scott Bessent, now Treasury Secretary, previously endorsed Trump’s economic strategy. Yet, recent actions by hedge funds like Elliott Management indicate growing skepticism. The Financial Times reported that Elliott warned of speculative bubbles fueled by Trump’s policies that could “wreak havoc” in a market crash.
Karim Cherif, head of alternative investments at UBS, echoed these concerns, stating, “As the new year unfolds, uncertainties persist regarding Trump’s policies, the global economic trajectory, and central bank actions.”
DeepSeek’s Success Sparks Geopolitical Tensions
The rise of DeepSeek has deepened fears about China’s influence in the technology sector. Liang Wenfeng, High Flyer’s CEO, has positioned his firm as a key player in the global AI race. The company’s ability to bypass U.S. trade restrictions on advanced microchips has drawn attention from both investors and policymakers.
Elon Musk suggested on social media that DeepSeek had likely circumvented these trade measures. Western governments have intensified their scrutiny of Chinese tech products, raising concerns about potential security risks and economic dominance. The combined effects of technological shifts, geopolitical competition, and hedge fund strategies have created a highly unstable environment for investors.
