「Hedge Fund Witch」 Li Bei's Letter to Investors: Fund NAV Significantly Retraced, Strongly Cautions Against Hasty AI Chasing

June 22. On June 21, Li Bei, founder of Shanghai-based Shanghai Banxia Investment Management Center, released an open letter to investors, revealing that her fund recorded a significant net asset value (NAV) decline due to its holdings in the energy, real estate, consumer, and building materials sectors. The fund’s current net equity exposure is 50%, with positions moderately reduced by liquidating holdings with insufficient conviction. In the letter, Li Bei openly admitted that the relevant holdings have come under heavy pressure recently, with corrections in the domestic demand and real estate sectors exceeding expectations. The most attention-grabbing part of the letter directly addressed current market sentiment: She fully understands investors who have lost patience, respects those choosing to redeem and remain on the sidelines, but for those looking to redeem to chase AI gains, she said, “Even if you scold me, I still want to advise: please be cautious.” Regarding the reasoning for avoiding AI chasing, Li Bei clearly noted that conditions for an AI bubble to burst have emerged. Citing Anthropic’s annual revenue growth rate, she explained that revenue growth for downstream AI model companies has slowed significantly, and is likely to fall short of the market’s prior optimistic forecasts by the end of the year. She also added that subsequent capital expenditure (capex) cuts are highly probable. Li Bei further pointed out that the current AI industry chain is in a phase of “high profits and valuations, leading indicators trending downward, lagging indicators still trending upward”—theoretically signaling a phase for gradual exit rather than adding more positions. On her own holdings, Li Bei insisted that leading companies tied to domestic demand currently have extremely low valuations: the price-to-earnings (P/E) ratio of consumer sector leaders has dropped from a peak of over 50 times to less than 10 times. Even if domestic demand remains at the bottom for a long period, there can still be solid absolute returns over a two-year horizon. Once domestic demand recovers or the real estate sector sees unexpected policy changes, significant excess returns will be realized quickly.