Sea Ltd (SE) Declined Despite Notable Change in Fundamentals

Hayden Capital, an investment management firm, released its fourth-quarter 2025 investment letter. 2025 proved how unpredictable markets can be in the short term. Markets displayed broad strength, highlighting their resilience. U.S. equities saw double-digit gains, while international markets performed even better. Remarkably, international stocks outpaced their U.S. counterparts for the first time since 2017. The firm had a productive 2025, especially as investor capital focused on anything related to AI, while other sectors were labeled as “AI losers.” In Q4 2025, the portfolio returned -12.9% compared to the S&P 500's +2.7% and MSCI World's +3.3%. The portfolio had returned +14.8% annualized after fees, since inception, compared to the S&P 500’s +13.5% and MSCI World’s +10.3% return. Approximately 42% of the portfolio is invested in Asia, ~41% in North America, ~16% in Latin America, and the rest in cash. Due to the influence of AI, the market is responding more to fear and rising uncertainty about the future rather than to facts. In addition, please check the firm’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Hayden Capital highlighted stocks such as Sea Limited (NYSE:SE). Sea Limited (NYSE:SE) is a technology company headquartered in Singapore that operates through e-commerce, digital financial services, and digital entertainment segments. On February 25, 2026, Sea Limited (NYSE:SE) stock closed at $104.47 per share. One-month return of Sea Limited (NYSE:SE) was -12.34%, and its shares lost 15.48% over the past 52 weeks. Sea Limited (NYSE:SE) has a market capitalization of $63.1451 billion.

Hayden Capital stated the following regarding Sea Limited (NYSE:SE) in its fourth quarter 2025 investor letter:

"Sea Limited (NYSE:SE): Sea Limited shares have declined ~-45% over the past few months. The magnitude of the decline these last few months is surprising, especially since not much has changed with their fundamentals.

After talking to other investors, it seems the short-term pessimism hinges on two points: 1) rising fear of TikTok Shop competition in Southeast Asia, and 2) Shopee reinvesting more heavily into logistics / entering a re-investment cycle – which investors fear will cap near-term margins at roughly ~0.7% of GMV this year, versus prior Street expectations of ~1.2%.

The market never likes negative earnings revisions (especially with how short-term oriented the market has become in recent years; LINK). Even if these investments will strengthen Shopee’s competitive position and moat for the long-term.

Amplifying this dynamic, is the market’s concern that this spend is defensive. That it’s a necessary response to TikTok rather than a voluntary choice. And that the margin compression we’re seeing is therefore structural, not temporary. The fear is that terminal margins might be closer to 1%, rather than 3% of GMV due to competition. However, I think the market is mistaken."

Sea Limited (NYSE:SE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 113 hedge fund portfolios held Sea Limited (NYSE:SE) at the end of the fourth quarter, up from 102 in the previous quarter. While we acknowledge the potential of Sea Limited (NYSE:SE) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Sea Limited (NYSE:SE) and shared a list of most promising stocks to invest in before they take off. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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