According to Business Insider, hedge funds are pouring astronomical resources into AI with Citadel consuming petabytes of data and Balyasny deploying an AI bot that 80% of staff now use. Bridgewater launched a $2 billion machine-learning-run fund in summer 2024, while Point72 created a standalone AI strategy called Turion that’s outperformed their flagship in 2025. Quant firms like D.E. Shaw and Two Sigma have used generative AI for over five years, but talent wars are intensifying as AI startups now match hedge fund compensation. Despite the massive investment, industry leaders like Citadel’s Ken Griffin and Elliott’s Paul Singer remain skeptical that AI can consistently beat markets.
The AI Arms Race Is Real
Here’s the thing about hedge funds – they’ve always been data-obsessed. But now we’re talking about a whole different scale. Citadel’s CTO mentioned they’re dealing with petabytes of data. That’s millions of gigabytes. Basically, they’re drowning in information and using AI as their life raft.
And it’s not just about processing power. These firms are building their own tools because they can’t risk using off-the-shelf solutions. Balyasny has BAMChatGPT, Man Group and Viking Global have their own chatbots. They’re essentially creating proprietary AI systems that become their secret sauce. When Matthew Henderey, a former CIA AI developer, joins your data science team, you know this is serious business.
The Quant Edge
Quantitative funds have a massive head start here. Firms like Two Sigma have been using generative AI for more than five years already. Bridgewater’s $2 billion machine-learning fund apparently produces “unique alpha uncorrelated to what our humans do.” That’s fascinating – they’re basically saying the AI finds patterns humans would never see.
But here’s where it gets really interesting. The talent wars have escalated dramatically. AI startups like OpenAI and Anthropic can now match hedge fund compensation packages. Young quants don’t even have to take pay cuts to work in Silicon Valley instead of Wall Street. That’s a huge shift from just a few years ago.
Divided Investment Approaches
The Tiger Cubs – hedge funds connected to Julian Robertson – are taking different approaches. Some are loading up on obvious winners like Nvidia and AMD. Others, like Maverick, are betting on the entire chipmaking ecosystem through their Maverick Silicon fund. It’s a classic case of whether you bet on the gold miners or the companies selling shovels.
Steve Cohen’s Point72 created a standalone AI strategy called Turion, which is interesting because they rarely launch new funds outside their flagship. The fact that it’s already outperforming their main offering in 2025 suggests they might be onto something. But is this sustainable or just catching a hot trend?
The Human Factor Still Matters
Despite all the AI hype, many industry leaders are pumping the brakes. Ken Griffin says AI can’t beat markets yet. Man Group’s AlphaGPT “still requires human oversight.” Paul Singer calls AI use cases “way exaggerated.” There’s a clear divide between the true believers and the skeptics.
At a recent London quant conference, the conclusion was pretty clear – humans, not machines, are still the edge required to beat markets. Man Numeric executives wrote that AlphaGPT doesn’t replace human judgment but amplifies it. The system handles data processing and initial analysis while humans provide strategic direction and final decision-making. Sounds familiar? It’s basically the same relationship these firms have always had with technology – tools enhance human capability rather than replace it.
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