A star London stock picker has blamed a rush of ‘low-quality money’ and ‘meme stock’ traders for a sell-off in global artificial intelligence shares last week that hit the value of his multi-billion-pound fund.

Stephen Yiu, whose Blue Whale counts City grandee Peter Hargreaves among its main backers, said selling among small investors spooked by fears over AI spending, growing Chinese competition and recent flare-ups in the Middle East meant the value of his fund had fallen by 20 per cent in July from £2.9billion.

‘There’s a lot of what I would say low-quality money, retail money that’s been unwinding over the last few weeks,’ he said,

Yiu added: 'And when you lump that in with the conflict in Iran you suddenly have this mega sell-off in AI. There is also a bit of a meme stock trade going on in the AI market with the likes of SpaceX.’

The hit to Blue Whale, which has generated strong returns following well-timed bets on the likes of Nvidia, was fuelled by a sharp drop in the value of South Korean chip maker Hynix, one of the fund’s biggest holdings, which saw its value tumble nearly 33 per cent last month after results that fell short of expectations.

‘I am not happy about it,’ Yiu told The Mail on Sunday. 

But he said the sell-off had allowed Blue Whale to top up its stake in SK Hynix by buying it lower.

‘We’re still very happy with Hynix,’ he said. 

‘Its shares have become a lot cheaper and we still think the earnings are on a positive trajectory so why wouldn’t we buy more?’

Last week’s AI sell-off saw South Korea’s stock exchange temporarily halt trading several times in a bid to defuse the panic.

Wall Street also took a hit with a sharp fall on the Nasdaq, only for it to rally towards the end of the week and log a slight gain. Among those fuelling the rally was Microsoft, which leapt 18 per cent over the week on strong sales and profit growth.