In July, the S&P 500 Index dipped just 0.1 per cent, but momentum strategies tied to artificial intelligence saw severe downturns. Goldman Sachs estimates show its high-beta basket fell 41 per cent, its technology basket 48 per cent, and its AI basket 38 per cent. High-beta momentum finished July down 28 per cent, its worst month on record. The AI trade had become overcrowded, attracting capital from hedge funds and systematic strategies into similar semiconductor and AI infrastructure winners. When signals flipped, forced liquidation followed, with hedge funds recording one of their largest gross exposure reductions since 2020. Stability returned after Citadel’s acquisition of a substantial portion of the Situational Awareness fund’s portfolio, triggering a record one-day rally. The 30-year Treasury yield ended July at 5.27 per cent, up 36 basis points, with its real yield reaching 3.03 per cent, a 15-year high. This pressure stems from Washington’s deficits and hyperscalers raising funds for AI infrastructure. The US Federal Reserve’s new approach under Chairman Kevin Warsh offers minimal forward guidance, potentially increasing uncertainty. The AI boom contributes to the discount rate that depresses valuations of its leading companies, demanding a shift to idiosyncratic opportunities.