His fundamental thesis is as an AI maximalist, with expertise on who will be the winners.
His fund completely blew up, even though his fundamental thesis still may be correct.
He made a ton of money early, but then he just kept increasing his bet size via leverage. The problem is that these stocks may be going up, but they are EXTREMELY volatile. When the whole market went down with some of the Iran news, his margin levels dipped too low, and his lenders issued margin calls. He had to sell his stakes at losses, and his fund collapsed.
Now, part of the problem is he was not a legacy hedge fund with great relationships with his banks, because if he was, he might have been able to postpone the margin calls. Had he been able to do that, he would have been ok, because his positions actually recovered within a few weeks.
It didn’t matter, though, because he was forced to sell at the low point.
In other words, even if your long term bet is correct, if you are maxing out your margin to max out your bet, you are one volatile dip away from blowing up.
No matter how good the bet, you have to be able to ride out the volatility to survive.
It’s like if someone offered you a bet on a coin flip, where they will pay 5x your bet if you win. How much should you bet on each flip?
Well, by expected value you should bet everything you have, because your EV is 2.5x, so the more you bet the higher your expected value.
However, if you bet it all, you have a 50% chance of losing all your money and not being able to make any more bets.