A fund managed by a former OpenAI researcher has pulled out of artificial intelligence investments after suffering losses, marking a rare retreat from the sector by an insider. The move is prompting some investors to question whether the AI boom is losing steam.
Why the fund pulled back
The fund, whose manager previously worked at the high-profile AI lab behind ChatGPT, had placed concentrated bets on a handful of AI startups and public companies. Those positions turned sour as valuations corrected and some portfolio firms missed revenue targets. The losses forced the fund to liquidate its AI holdings entirely, according to people familiar with the matter.
The researcher did not respond to requests for comment. The fund's name and the exact size of the losses were not disclosed.
A signal for the broader market?
Insider-led funds often carry weight with other investors, who see them as having a deeper understanding of the technology. When someone with that background exits, it can ripple through the ecosystem. Several venture capitalists and hedge fund managers contacted by GFdaily said they are now reviewing their own AI exposure more carefully.
“We’re not panicking, but we’re definitely doing more due diligence,” one investor said, speaking on condition of anonymity because they were not authorized to discuss the matter publicly. Another said the fund's retreat “adds to the caution that’s been building for months.”
The pullback comes at a time when AI stocks have already fallen from their 2023 peaks. The Nasdaq-100, heavy with tech names, is down about 8% from its high. Some analysts have pointed to slowing growth in cloud revenue and rising competition as reasons for the chill.
What the fund was betting on
The fund had invested in companies developing large language models, AI chips, and enterprise software. It also held positions in a few publicly traded firms that had ridden the AI wave. The losses appear to have been concentrated in earlier-stage startups that failed to secure follow-on funding at higher valuations.
One of the fund's bets was on a startup building AI tools for drug discovery. That company recently laid off staff and is seeking a buyer. Another was a data-labeling firm that lost a key contract. The fund had also taken a short position against a major AI stock, which backfired when the stock rallied on an earnings beat.
What happens next
The fund is now sitting on cash and has told limited partners it will not make new AI investments for the foreseeable future. Some LPs are pressing for a full return of capital. The former researcher has not indicated whether they plan to start a new fund or return to a corporate role.
For the AI sector, the question is whether this is an isolated incident or the start of a broader pullback. Several other tech-focused funds have quietly reduced their AI allocations in recent months, though none as publicly as this one. The next few earnings cycles from major AI companies will likely shape the narrative.
