Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTAditi GangulySun, August 9, 2026 at 12:20 PM GMT+2 10 min readMoneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.Recently, shares in AI infrastructure companies have dropped as a result of a significant sell-off. According to Morgan Stanley (1), companies involved in AI infrastructure experienced an average drop of 7% in share prices over the last month, for the period ending on July 24.As the market pulled back on AI stock prices, the receding tide exposed some vulnerabilities within AI investing circles.Must ReadJeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being oneJPMorgan still sees gold hitting $5,000/oz by Q4 — and savvy investors are protecting their wealth with a tax-advantaged Gold IRA. Learn more with a free guide from Priority GoldThe tax breaks in Trump's 'big beautiful bill' expire after 2028 — and experts say most people won't act in time. What to do before the window closesHigh-profile AI hedge fund Situational Awareness (2) was forced to sell its entire book of public investments to rival fund Citadel after leveraged bets on AI companies, like South Korean semiconductor company SK Hynix, didn't pan out. The two-year-old hedge fund peaked at $45 billion earlier this month, but sold its shares for $10 billion in a deal that closed on the morning of July 30.Situational Awareness is led by 25-year-old Leopold Aschenbrenner, a former OpenAI researcher nicknamed the "Nostradamus of A.I." — in fairness, the original Nostradamus also got a fair few predictions wrong (3).CNBC's Jim Cramer, host of Mad Money, made a few prophecies of his own as other areas of the market saw gains in the wake of AI's decline."Now, you can call it a broadening, or you can call it a fleeing," he said on Mad Money (4).Understanding the AI infrastructure stock dropThough the Situational Awareness situation and the larger drop in AI infrastructure share prices seem to spell trouble for the industry, the market's recent turmoil isn't necessarily an indictment of the industry itself.Even Aschenbrenner recently committed another $400 million to a privately held company just days after his hedge fund weathered serious financial trouble (5).Hamiz Awan, a managing partner and co-founder of tech investment firm Plutus21, says any crowded investment that involves a significant amount of leveraging, the practice of borrowing money to buy an investment, will almost always end in a large reversal.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info