TheChek News Flow

UK carmaker reports bigger than expected quarterly loss

Aston Martin has defended a contentious £550mn debt financing deal as “important for the company as a whole” as the struggling UK carmaker reported bigger than expected quarterly losses.

The company’s adjusted loss before tax and interest narrowed to £52mn for the quarter ended June, from a £57mn loss in the same period last year, but higher than analysts’ expectations of a £45mn loss. Gross profit margin of 33 per cent was lower than an expected 36 per cent due to continuing dealer support to clear vehicle inventory.

Aston Martin last week struck a deal to borrow £550mn from BlackRock-owned private credit firm HPS, which it said would boost its pro forma liquidity to £340mn from £145mn liquidity at the end of June.

The carmaker, whose shareholders include its billionaire chair Lawrence Stroll, China’s Geely and Saudi Arabia’s Public Investment Fund, has been repeatedly forced to raise cash as it struggles to stem years of steep losses. Its net debt also remained high at £1.4bn.

HPS routinely provides capital to businesses in dire need of cash, charging high fees in the process.

Aston’s latest move was challenged by existing creditors who argued that a financing deal that placed assets beyond their reach breached key terms of the company’s existing debt. The proceeds of the deal were also used to repay some of the money that was drawn from a £50mn facility offered by a consortium backed by Stroll in April.

The debt financing followed the £50mn sale of Aston’s Formula 1 naming rights to AMR GP Holdings, the racing team’s holding company that is indirectly controlled by Stroll.

The deal was also criticised by existing shareholders who questioned the valuation as too low considering that Stroll had secured perpetual rights to use the Aston Martin name for the racing name. Stroll has previously told the FT that he was not considering an exit from his investment in the carmaker after the £50mn sale.

During an earnings call on Wednesday, Henning Cosman, analyst at Barclays, questioned executives on the rationale of the £550mn financing and its significance for both the company’s majority and minority shareholders.

“Look, the board sees the financing as important for the company as a whole,” said chief financial officer Doug Lafferty. “I don’t think there’s any differentiation between major stakeholders or minor shareholders.” 

Chief executive Adrian Hallmark added that the liquidity injection gave the company “additional resilience and further flexibility to execute our current and future product plans”.

Despite the miss in gross profit margin, shares in Aston rose 3 per cent on Wednesday morning, as revenue jumped 62 per cent to £358mn on the back of an increase in sales of its higher-margin Valhalla supercar model, which had an average selling price of £1.1mn. 

For 2026, Aston maintained its projection that its wholesale volumes would remain flat at about 5,450 vehicles while its gross margin was expected to improve into the upper 30 per cent level compared with 29 per cent last year.

PayPal has a message for Wall Street and would-be buyers: “We got this.” That’s the upshot of CEO Enrique Lores’ response to what he called “recent M&A speculation”—also known as Stripe’s reported $53 billion takeover bid for the struggling payments firm. Lores wouldn’t comment about anything specific, but his comments implied Stripe’s offer didn’t meet PayPal’s bar, and the board was sticking with its existing plan for managing the business.

Lores said the right things, to be sure. The board is “open” to offers and would compare any with its own plan and choose “the option that creates more value.” His plan, which he said “will create significant value for our shareholders,” involves things like speeding up Venmo’s growth and expanding its payment services business (which includes Braintree) and getting affluent consumers to use PayPal more. When Lores was asked why these efforts would succeed where PayPal’s previous turnaround measures hadn’t, he repeated what he’d said a few moments before and added that he was “improving execution, improving accountability.” In other words, he would run the company better than in the past. It’s not exactly a persuasive answer.

The Stripe offer, reportedly made with private equity firm Advent, was too low—there’s no doubt about that. It’s possible it has elements that made it unappealing, such as a lack of secured financing. Perhaps the board is negotiating with Stripe and Advent behind the scenes to lift the offer. The board might be quietly exploring other options. But it’s common in these situations for a board to publicly open an auction up to all comers as a way of seeing what someone might pay. PayPal hasn’t done that. It’s leaving shareholders to trust that the board knows what it’s doing.

That’s asking a lot. After all, PayPal has been a dumpster fire in recent years, with its stock falling roughly 80% since 2021 as growth has slowed to a crawl and rivals like Apple Pay have dug in. Lores, a former CEO of HP, has only been in the job since March. He has no prior experience running a payments firm.

It may be relevant that no one on the board has a significant stake in the company. As of earlier this year, the entire board’s combined stake was 5.66 million shares, or 0.6% of the shares outstanding. Would PayPal’s board take a different stance if directors had a bit more skin in the game? Just asking.

Still, ChatGPT may have a leg up in other ways. More than 50 million people pay to use ChatGPT, whereas Google hasn’t disclosed the number of paid Gemini consumer subscriptions.

ChatGPT also is increasingly becoming a so-called AI agent that can handle tasks for users in the background, including scheduling events and sending emails or invitations through integrations with Gmail, Google Calendar and other applications consumers use. Earlier this month, OpenAI unveiled a desktop “superapp” that marries ChatGPT with the company’s more agentic products, including its coding agent Codex and knowledge work agent ChatGPT Work.

OpenAI previously projected ChatGPT would generate $25 billion in revenue this year from subscriptions, advertising and “research partnerships,” up from around $10 billion in chatbot revenue last year. (The company also projected it would burn $25 billion in cash overall this year, though its recent burn rate couldn’t be learned. OpenAI previously told investors that its adjusted operating income margin was -122% in the first quarter of the year.)

Heading into 2026, OpenAI CEO Sam Altman warned employees to expect “rough vibes” based on Google’s progress in model development, though Google’s progress in developing stronger AI coding capabilities has since fallen behind OpenAI and Anthropic, according to publicly available evaluations of the models.

Since then, Anthropic has emerged as the more worrying competitor for OpenAI. The Claude-maker has surpassed OpenAI in terms of revenue on the strength of its business of selling AI to enterprises and has caught the attention of the U.S. government due to the strong cybersecurity capabilities of its most advanced models. OpenAI’s models also have strong cybersecurity capabilities, as evidenced by the way OpenAI’s AI agent recently hacked the company’s systems and the systems of model repository Hugging Face.

Early chip stock gains and a comeback in traditional value sectors are factors in Russell 1000 Value Index’s outperformance over its growth counterpart

Value stocks are quietly outperforming growth this year, but the companies driving the surge look nothing like traditional value plays.

The Russell 1000 Value Index has gained about 20% this year, trouncing its growth counterpart, the Russell 1000 Growth Index, which has declined 1.6%. Value stocks typically trade at a discount to what a company’s profits suggest they are worth; growth stocks aren’t cheap, but are expected to increase earnings at a faster-than-average pace.

The performance gap between the Russell benchmarks caught some investors off guard—until they examined the list of names leading value’s glorious comeback: a cadre of technology companies, including some of the Magnificent Seven.

Yes, investors have been rotating out of some of the (formerly) highflying chip stocks in recent weeks and into less loved sectors such as consumer staples and healthcare, which rose 2% and 2.3% on Tuesday, respectively. But some of those tech giants that came to represent the future growth of the economy and dominate the market are value stocks now. Technically, at least.

In June, the Russell Index reconstitution shifted tech giants Amazon AMZN -0.23%decrease; down pointing triangle, Apple and Microsoft MSFT 1.09%increase; up pointing triangle partially or further into the Russell 1000 Value Index while migrating key chip makers, including Micron Technology, Advanced Micro Devices and Western Digital, into its growth counterpart. The rebalance took place in late June, when semiconductor stocks were riding a seemingly relentless surge and megacap tech was lagging behind.

In short, the value index rode those chip makers to new heights, then swapped them out for Amazon, Apple and Microsoft just as they were touching recent lows.

“It was like the index got so lucky,” said Sam Peters, portfolio manager on the value strategy at ClearBridge Investments. “It caught that blow‑off top in momentum, and then sold it right before they rolled over.”

Investors will get an important update from Apple and Amazon when they report quarterly earnings.

On Tuesday, the Dow Jones Industrial Average gained 1%, or 537 points, while the S&P 500 rose 0.2%. The tech-heavy Nasdaq fell 0.2%.

Value stocks began their ascent this year while still trading at a steep discount to their growth counterparts. The rally gained further traction as surging energy prices and broader AI momentum lifted the sector. Then came the June reconstitution of the Russell 1000 Value Index, which removed many chip names shortly before chip stocks lost their momentum.

“This was hugely consequential and very different from what has happened in previous rebalances because we got Apple, Microsoft, Amazon,” said Mary Jane Matts, director of large-cap equities at CS McKee. “They all came in at huge weights, and where they are in terms of the market capitalization, they are now dominating this value benchmark.”

Value indexes are historically dominated by established names with reliable cash flows, featuring sectors such as financials, energy, industrials and utilities.

Value investors argue that this year’s resurgence isn’t a fluke, but the start of a sustained long-term run. Even with recent gains, value stocks remain incredibly cheap compared with their growth brethren. At the end of June, the Russell 1000 Growth Index traded at a 12-month forward price-to-earnings ratio of 26, compared with a forward P/E of 18 for the Russell 1000 Value Index.

What’s more, many of today’s value holdings are displaying growth characteristics, offering the strategy a dual tailwind. For example, Apple briefly hit $5 trillion in market cap on Tuesday, surpassing Nvidia NVDA 0.25%increase; up pointing triangle as the most valuable company.

Still, the recent big-tech invasion has created a paradox. The Russell 1000 Value Index now looks more like a “poor man’s growth index,” driven more by earnings expansion than cheap asset multiples, according to ClearBridge’s Peters. This shift complicates life for traditional stock pickers who strictly adhere to the deep value principles of Benjamin Graham, Warren Buffett’s mentor.

“You have to play the game that’s on the field,” Peters said, adding that he is still overweight traditional value sectors including energy, healthcare and other real assets such as commodities and materials. “You have to invest in the market you have, not the one you want.”

Krishna Chintalapalli, portfolio manager at Parnassus Investments, argues that the changes are good news. Value investing must evolve beyond cheapness to focus on corporate quality, especially as AI permeates traditional value sectors like financials and utilities, he said.

Chintalapalli views Amazon and Microsoft as value plays because both companies boast durable economic moats and strong earnings power while trading at reasonable discounts compared with their historical norms and peer group.

“AI is pervading and impacting every sector,” said Chintalapalli. “It is a little hard to have a very old‑school approach to value investing. You have to adapt it to the current environment, and that means you have to marry quality with value.”

Beyond megacap tech, Chintalapalli has found AI-linked value plays in the picks‑and‑shovels layer of the infrastructure build-out. One key holding is Cummins, a diesel-engine manufacturer trading at low multiples while benefiting from a fresh growth catalyst supplying backup generators to data centers. Another top pick is Brookfield Renewable, a renewable power platform contracting multiple gigawatts with hyperscalers like Microsoft and Alphabet.

Expanding market leadership and broader earnings growth across sectors has also benefited small-cap value stocks, said Francis Gannon, co-chief investment officer at Royce Investment Partners. The Russell 2000 Value Index has outperformed its growth counterpart since hitting bottom during last April’s “tariff tantrum” selloff. So far this year, the small-cap value benchmark is up 23%, outpacing the growth index’s 15% gain.

“The broadening of the market has led to value outperformance, but the broadening of the market has also been because earnings growth has broadened out as well.”

Program that held down premiums not renewed for 2027, resulting in higher costs for some seniors

The Trump administration plans to end a subsidy program that helped hold down premiums for Medicare drug plans, a move that could leave many seniors facing higher rates for their prescription coverage next year.

The move will eliminate a program that is giving insurance companies an estimated $3.6 billion in subsidies this year to blunt increases in premiums for the Medicare prescription plans, known as Part D. The program will end after 2026, according to administration officials.

High drug costs are a perennial issue—especially for seniors on fixed incomes—and healthcare affordability is expected to be a focus in the midterm elections. Roughly 25 million people have Part D plans, and they will learn about their 2027 rates in the fall.

A Trump administration official said the extra subsidies encouraged insurers to raise rates, knowing the government would pick up the extra cost. He said the subsidies weren’t needed, and other policies that help hold down Part D costs also remain in place.

“We are stabilizing the market so this bailout is no longer needed,” said Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, in a posting on social media.

The Trump administration official said that if the program had remained in effect next year, more than half of the subsidy money would have flowed to one company, UnitedHealth Group. A UnitedHealth spokesman said the company is “committed to working with CMS, ensuring seniors have access to affordable prescription medicines.”

The average premium for a Part D plan was around $36 a month this year, according to KFF, a health-policy nonprofit.

The administration official said around 25% of Medicare Part D plan enrollees would see premiums for their plans stay flat or go down next year. Around 30% will have an increase of less than $10 to their monthly bill.

For the remaining 45%, he said, the increases are largely in the $11 to $20 range a month.

Seniors should be able to find lower premiums if they switch plans, he said, adding affordable options are still available.

Medicare drug coverage premiums are rising because the plans have been hit by growing expenses for GLP-1 medications and other specialty drugs. Changes implemented under 2022’s Inflation Reduction Act also have pushed up premiums. The law reduced many Medicare enrollees’ out-of-pocket expenses but required insurers to shoulder more of the costs.

Those pressures are expected to continue in 2027, said Juliette Cubanski, a vice president at KFF.

The Medicare Payment Advisory Commission, a federal watchdog agency, estimates the subsidy program, which was supposed to stabilize Part D, reduced the average Part D plan premium by about 40% in 2025. This year, it cut the average rate by an estimated 27%.

Part D plans offer stand-alone drug coverage alongside Medicare’s traditional medical benefits. Higher premiums for the Part D plans could push more Medicare enrollees into Medicare Advantage, the private-insurer version of Medicare, which generally wrap in drug benefits and often charge no premiums at all.

The subsidy program has pumped an estimated $9.8 billion into the market, $6.2 billion in 2025 and $3.6 billion in 2026, according to a Government Accountability Office report.

Despite the extra funding, the number of drug plans offered has dropped by about half in the last two years because insurers have pulled back.

Mark Zuckerberg Says U.S. Should Accelerate AI Development, Not Restrict It

Meta CEO says discourse regarding artificial intelligence isn’t optimistic enough

Mark Zuckerberg thinks artificial intelligence is working out great for humanity. His fear: that the people who think otherwise will influence who has access to the fast-evolving technology.

Optimism about AI’s impact on the world “should empirically be the default assumption of how this is going to play out,” the Meta Platforms META -0.08%decrease; down pointing triangle chief executive officer said in an interview. He cited historical analogues, recent jobs data and his own personal use of AI for parenting and fitness as informing his positive outlook on the technology.

“I get that it’s always hard to debate about the future because it hasn’t happened yet,” Zuckerberg said. “But I do think we have a lot of data points at this point, and that should point us to be much more optimistic than I believe the current discourse reflects.”

In an opinion column in The Wall Street Journal on Tuesday, Zuckerberg said “superintelligence”—his company’s preferred term for smarter-than-human AI—“will be the most profound technological advance we will see in our lifetimes,” as long as its power isn’t “restricted to a few institutions.”

He called it “surprising that the discourse from many of those who are developing artificial intelligence is so filled with doom,” an apparent reference to warnings about mass job displacement by leaders at companies including Anthropic and OpenAI, makers of the top-rated AI models.

Zuckerberg, whose company is racing to catch up to rivals including Anthropic and OpenAI, lends a high-profile accelerationist voice to America’s debate over how to develop and regulate increasingly powerful AI models. Meta shares have fallen about 17% during the past year.

“There are new issues that we need to think through,” he said in the interview. “But at the same time, as we think through those issues, distributing the technology seems like it is creating more value than harm by quite a margin on all these fronts.”

The Trump administration is in the process of implementing an executive order establishing a voluntary 30-day review period for new models. Zuckerberg said he thinks any such review should be done as efficiently as possible.

“I think saying, ‘Hey, we want to review stuff for’—whatever it is—30 or 60 days, it may not sound like that much,” he said. “But the field is moving so quickly, that actually is quite a meaningful amount of time.”

With Meta’s AI model development lagging behind that of Anthropic and OpenAI, any across-the-board regulation on the speed of development could potentially lock in those companies’ leads.

Some Trump administration officials have also discussed restricting U.S. companies from using open-weight models developed in China, citing allegations that Chinese companies have unfairly copied American models’ technology. Critics of such restrictions have said access to lower-cost open models levels the playing field for companies and AI developers.

In the interview, Zuckerberg, whose company recently signed a letter urging the government to avoid banning open-weight AI models, said he doubted “banning open-source models from different countries is going to be productive.”

American policymakers should concentrate their efforts on accelerating the domestic AI industry and eliminating bottlenecks that would slow down AI-bred innovations such as new drugs, he said.

Meta has projected up to $145 billion in capital spending this year, largely to buy AI chips and build out data centers. It laid off 8,000 employees in May, attributing the cuts to the cost of its AI initiatives.

In June, the company announced it would create a workforce academy to train skilled workers to help build its data centers. The free, five-week program guarantees participants a job at a Meta site upon graduation.

“So far, I think that all the work around AI has net created a lot of jobs because there’s all this infrastructure that needs to get created,” he said. “So that concern hasn’t exactly played out the way that people feared it might.”

The company will give investors an update on its business Wednesday when it reports second-quarter earnings after the bell. Analysts are expecting it to go free cash flow negative as it steps up its spending on AI infrastructure.

On past earnings calls, Zuckerberg has touted his company’s vision of personal superintelligence. In the interview, he defined that as “basically the combination of really strong and intelligent AI with context about you.”

In his own life, Zuckerberg said he uses AI to pull recipes together and order all the ingredients needed to bake with his 3-year-old daughter every weekend. He also uses it to help him stay in shape.

“I put cameras in my gym, and it watches me work out and can give me feedback on that,” he said. “It just helps out with all the stuff.”

News Corp, owner of the Journal, has a content-licensing partnership with Meta.

CATL aims to become market leader for battery energy storage systems

In a huge industrial building in Xiamen, south-east China, lie the charred, melted remains of battery cells jolted by a massive electrical charge to simulate a lightning strike.

The high-voltage test is just one of many being carried out on new battery systems, made by China’s CATL, designed to power AI data centres and back up electricity grids.

Unlike the car batteries that CATL has been making for years, these systems have to operate around the clock under all kinds of conditions — hence the simulated lightning strikes among scores of tests in extreme operating environments.

Chen Xiaobo, who leads the research centre, told the FT that after “many years” of developing lithium cells for cars, the company believes its batteries can now be integrated into “much larger-scale systems”.

CATL’s facility in Xiamen is symbolic of the Chinese group’s ambition to move beyond making low-cost lithium batteries, a business it dominates worldwide.

“The original motivation for investing in this laboratory emerged from the evolution of energy storage itself — from today’s distributed, low-voltage storage systems towards higher-voltage, grid-oriented energy storage applications,” Chen said.

For Robin Zeng, the chemistry whizz who founded CATL after making batteries for early Nokia and Motorola mobile phones, investments like the Xiamen centre are also part of a years-long effort to foster — and dominate — new battery-powered industries.

The Chinese group controls about 40 per cent of the market for EV batteries, which contributed about three quarters of its $61.4bn in sales last year.

Several investments highlight how CATL is positioning itself to take a foothold in new sectors that stem from the megatrends of AI, the replacement of oil, gas and coal via renewable energy and the electrification of the world’s transport and heavy industry systems.

“Our ambition is not just limited to being a battery supplier to [carmakers] . . . we see ourselves as a high-tech company for the renewable energy sector,” Oscar Luo, CATL’s head of overseas investment, told the FT in June when it announced the deployment of battery swapping stations for electric lorries in Europe.

CATL has made direct investments into 152 entities, as well as indirect investments, via its subsidiaries and funds, into more than 9,900 businesses, according to data from Chinese corporate information service Tianyancha. That compares favourably with rival BYD’s 109 direct and 2,856 indirect investments.

CATL has already won about 30 per cent of the battery energy storage system market, a sector that is growing rapidly due to AI. Luo highlighted investments in large battery systems for powering buildings, ports, mines and factories, as well as small-scale systems for aircraft and drones.

The company has also deployed its batteries on close to 1,000 vessels, mostly smaller craft operating close to the Chinese coastline, at ports or in rivers. 

As many of these sectors are only just starting to wean themselves off fossil fuels, CATL executives have promised to support the development of related infrastructure, including investing billions of dollars to build vast networks of battery swapping stations for cars, trucks and ships.

Chen, the Xiamen centre boss, said that at a “component level” testing for battery cells and packs was mature. However, once these battery components are integrated into more complex systems — such as storage containers, electric aircraft and ships — and large-scale energy storage systems, “the level of integration becomes significantly greater and more complex”, he added.

As part of an industry-wide approach, he said CATL’s testing facilities were open to its customers, such as data centre owners or electricity grid operators, too.

Many of CATL’s recent investments, as well as its research and development budget, have been channelled towards battery technologies and chemistries, such as sodium. In April, the company touted that the bottlenecks for commercialisation of sodium batteries had been overcome and the group was moving to mass production by the end of this year.

Other investments in recent months include spending close to $1bn on a 38 per cent stake in Chinese data centre operator VNET. It has also built a 49 per cent stake in Zhongheng Electric, which owns a leading domestic supplier of high-voltage direct current power systems.

On Friday CATL said revenue rose by 55 per cent to Rmb277bn ($40.9bn) for the six months to June, with net profit up 42 per cent to Rmb43.3bn ($6.4bn), amid strong demand for energy storage systems.

The company’s Shenzhen-listed shares are up almost 40 per cent over the past 12 months and it also announced plans to buy back up to Rmb40bn in stock.

Given its increasing importance to the world’s energy systems, CATL has found itself in the crosshairs of both Washington and Beijing. In January last year, the company was designated by the Pentagon as having military links — an allegation the company strongly denies.

On the Chinese side, Beijing has become increasingly wary over leaking of Chinese intellectual property related to cutting-edge batteries, fears that could slow down CATL’s overseas ambition.

Still, in the wake of the oil price shock this year following the US-Iran war, many analysts are raising their long-term forecasts for battery demand.

Researchers at Bernstein in Hong Kong forecast that global battery demand will grow from 1.8 terawatt hours last year to 5.7 TWh by 2030 and 16.6 TWh by 2050. This pace reflects a compound annual rate of 9 per cent over the next 25 years. These forecasts follow a 10-fold growth over the past five years as falling battery costs improve their economics.

Spurred by both rising demand and geopolitical tensions, CATL is striving to secure its own supply chains. The company has spent heavily over many years to secure access to key resources, including lithium and nickel, and in April established a mining subsidiary with registered capital of Rmb30bn ($4.4bn).

Neil Beveridge, who leads Bernstein’s energy research, said that while some investors have questioned CATL’s push into non-core areas, others regard its battery dominance as akin to TSMC’s stronghold over the manufacturing of high-end semiconductors.

TSMC, like CATL, has a market share of about 40 per cent for its core products, while boasting the highest margins in the sector and the greatest share of the profit pool.

Beveridge added: “There are some parallels that we see with TSMC. It’s built on their technology leadership . . . that can effectively shield them from the competition and enables them to make much higher margins than the rest of the industry.”

Hedge funds face demands to stump up collateral as AI stocks tumble

Scale of losses in recent weeks sparks growing risk aversion on Wall Street

Wall Street banks have demanded more collateral from hedge funds in recent weeks as a rout in AI stocks accelerates and triggers heavy losses across several popular strategies.

Banks asked funds whose holdings are heavily concentrated in certain industries to provide additional collateral to keep their existing levels of leverage, according to four people familiar with the matter.

The collateral demands highlight the mounting fears on Wall Street about the scale and speed of the sell-off in AI stocks over the past fortnight, which has upended a rally in a sector favoured by many funds.

The Nasdaq 100 briefly veered into correction territory on Tuesday, falling 10 per cent from its record high in early June. Stocks that had surged earlier in 2026 have fallen sharply, with Sandisk and Intel down 53 per cent and 39 per cent from their peaks, respectively. The wider Philadelphia semiconductor index has lost a quarter of its value since late June.

Goldman Sachs and JPMorgan Chase were among the banks that had asked clients to stump up additional collateral, according to several people familiar with the matter. Both banks declined to comment.

“This is the kind of risk management the market should expect right now. It’s pretty basic stuff,” said a person close to one of the banks.

The person added that many of these calls for additional collateral were automatically triggered by the market volatility, something that is generally included in agreements between funds and banks.

Banks build in protections when lending to hedge funds to make sure they do not incur losses in case the market turns negative. 

Goldman said in a recent note to clients that the build-up in gross leverage in the first five months of the year was the largest cumulative increase it had recorded since it began tracking the data in 2016, suggesting funds had been turning to borrowing to juice up their trades ahead of the sell-off.

Risk committees at banks constantly re-evaluate the holdings of their hedge fund clients and whether they need to alter or limit the scale of leverage they extend to them.

In a sign of the pain for hedge funds, long-short hedge fund strategies were down 1.3 per cent as of noon in New York on Tuesday, while multi-strategy funds were down 1.7 per cent, according to the Goldman report.

The last time all of those strategies were down more than 1 per cent in a single day was during the intense market swings ignited by the coronavirus crisis in 2020, the report added. However, hedge fund strategies were still on average up more than 10 per cent for the year.

Prime brokers extend leverage to hedge funds by lending against a portfolio of stocks, allowing them to boost their returns. Yet that leverage can also lead to painful drawdowns if the market turns against a hedge fund’s positions, as it magnifies losses.

Concentration risk in the market has steadily grown this year, with the S&P 500’s biggest 10 companies representing roughly 40 per cent of the index, according to data from Capital Group. That surpasses levels seen in the early 2000s dotcom bubble. 

Banks have not been immune to the concentration risk. In a separate mid-year report to clients, Goldman Sachs said that as of June 30 roughly 16 per cent of its prime brokerage book was directly exposed to AI memory stocks.