Hayden Capital, an investment management firm, released its first-quarter 2026 investment letter. A copy of the letter is available to download here. The portfolio faced difficulties in the first quarter due to concerns about AI disruption and the ongoing conflict in Iran. Companies that are either digitally vulnerable or economically sensitive have been the most affected. As a result, the portfolio declined 28.3% during the quarter, compared with decreases of 4.3% for the S&P 500 and 2.2% for the MSCI World index. Since its inception, the Fund has achieved an annualized return of +11.2% after fees, compared with the S&P 500’s +12.7% and the MSCI World’s +9.8%. There has been a significant shift in capital towards investments linked to AI infrastructure development. The firm is actively seeking companies that can harness this new technology and leverage their data advantages to improve current products and gain a competitive edge over slower adopters. In addition, please check the firm’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Hayden Capital highlighted Unity Software Inc. (NYSE:U) as a newly added position. Unity Software Inc. (NYSE:U) is a leading software company that develops, deploys, and grows games and interactive experiences across mobile phones, PCs, consoles, and extended reality devices, and provides AI solutions to developers in the development lifecycle. On May 28, 2026, Unity Software Inc. (NYSE:U) closed at $29.94 per share. One-month return of Unity Software Inc. (NYSE:U) was 10.36%, and its shares gained 14.80% over the past 52 weeks. Unity Software Inc. (NYSE:U) has a market capitalization of $13.07 billion.
Hayden Capital stated the following regarding Unity Software Inc. (NYSE:U) in its Q1 2026 investor letter:
“Unity Software Inc. (NYSE:U): Unity is our one of our newer investments, and one we’ve been adding to in the recent drawdown. Unity is one of the two dominant 3D content-creation engines in the world – its engine powers roughly ~70% of mobile games globally, and a meaningful share of console and PC titles as well.
When a developer chooses Unity to build a game, they typically stay on that engine for the life of the title, and for any subsequent sequels. Switching means re-tooling an entire team, asset pipeline, and codebase – which is why Unity’s installed base has historically been so sticky, despite years of operational chaos.
Its product is mission-critical, deeply embedded in a customer’s workflow, with high switching costs. Despite this, Unity today trades at one of its lowest valuations since IPO. Why?
The short answer is that Unity has been one of the most poorly run companies of the last decade. The 2022 ironSource merger was botched. The 2023 runtime fee announcement (charging developers per game install) created a developer revolt and forced the CEO out. Key engineering talent left for competitors. The ad business hemorrhaged share to AppLovin – and was in fact one of the key theses for our Applovin investment (see our Applovin write-up in our Q2 2024 letter; LINK).…” (Click here to read the full text)
Unity Software Inc. (NYSE:U) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 67 hedge fund portfolios held Unity Software Inc. (NYSE:U) at the end of the first quarter, compared to 80 in the previous quarter. For the second quarter of 2026, Unity Software Inc. (NYSE:U) projects total strategic revenue between $455 million and $465 million, representing year-over-year growth of approximately 29% to 32%. While we acknowledge the risk and potential of Unity Software Inc. (NYSE:U) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Unity Software Inc. (NYSE:U) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Unity Software Inc. (NYSE:U) and shared the list of best low priced growth stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
