Brian Moynihan warns of market risks following the near collapse of AI hedge fund Situational Awareness
Bank of America CEO Brian Moynihan warned that the near collapse of the AI hedge fund Situational Awareness serves as a warning shot for financial markets currently fueled by high valuations and heavy borrowing. The fund, led by Leopold Aschenbrenner, reached a peak of $45 billion in assets before being forced into a fire sale of its public equities to Citadel last week. Bank of America acted as a prime broker for the fund, providing leverage and executing trades. Moynihan noted that high valuations and systemic leverage require caution, suggesting that major prime brokers may tighten underwriting standards to adjust for recent stock run-ups. While the fund's meltdown was triggered by mounting margin calls during a market pullback, the intervention by Citadel provided the necessary capital to settle debts. The news sparked a brief sell-off in AI-related shares, but prices rebounded once Citadel acquired the positions, easing investor fears of a further market correction.