The largest trading loss in history has been updated: a $35 billion AI bet tops the list, with cases of significant losses from firms like Jane Street coming to light.

The profile of the largest trading losses in history is gradually becoming clearer. According to a loss ranking compiled by the market titled "The 25 Biggest Trading Losses of All Time," a $35 billion loss related to leveraged AI stock bets in July has risen to the top of the list this year. The ranking reveals that only seven of the occurrences involved hedge funds, while banks and corporations constituted the vast majority of significant liquidation events. This ranking clearly illustrates how leverage, concentrated holdings, and high-confidence trading magnify relatively mild market fluctuations into billions of dollars in colossal losses. The top loss, Situational Awareness, amounts to approximately $35 billion, followed closely by Morgan Stanley with around $14 billion and JPMorgan Chase with about $13 billion. Situational Awareness, which briefly became the "AI star fund" on Wall Street, 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, rapidly expanding its asset size. However, after entering July, AI-related stocks faced severe sell-offs, which quickly worsened high-leverage positions, putting the fund in a position to meet margin calls. Ultimately, Situational Awareness was forced to liquidate a large portion of its publicly traded stocks and sold most of its stock portfolio to billionaire Ken Griffin's Citadel. Statistics indicate that other major loss cases include: Archegos Capital Management at about $12.5 billion, France's Industrial Bank (Socit Gnrale) at approximately $11.3 billion, Amaranth Advisors at around $10.7 billion, and Long-Term Capital Management at roughly $9.5 billion. The ranking also points out that interpretations of it should be approached with caution, especially regarding investment funds. A large asset management company could record billions of dollars in paper losses, even from a relatively small percentage of net asset value drawdown, due to its massive management scale. For instance, Millennium Management manages approximately $89 billion in assets, meaning that just a slight over 2% drop could translate to about $2 billion in losses. The ranking also notes that Tiger Global's $40 billion loss in 2022 was not included, representing a significant omission if included, it would be enough to top the list. Additionally, Jane Street is expected to rank among the top. Reports indicate that the firm suffered about $15 billion in losses due to exposure from AI-related trades, but the debate on whether this market maker should be partially classified as a hedge fund continues. According to multiple media reports, Jane Street faced a loss of about $15 billion in July, which, if true, would signify its first monthly loss in approximately a decade. This loss is primarily associated with its investment in the AI hedge fund Situational Awareness facing liquidation, as well as the simultaneous severe volatility in tech stocks. Jane Street stated in a memo: "We largely incurred losses from the same group of trade positions, which had shown strong excess performance in the second quarter." The company specifically noted that in July, AI-exposed stocks dropped significantly, with some of the most exposed semiconductor and storage chip stocks declining by nearly 50%.