Plus, a look inside Leading the Future & a Thinking Machines Lab co-founder defects back to OpenAI
The Week in Short
**Leopold Aschenbrenner’s **AI-centric hedge fund sells its public holdings after a market rout, a warning flare for the **increasingly leveraged AI industry. **TBPN Host John Coogan talks tech media and life after OpenAI ownership on the podcast. SPVs outpace direct share listings as **secondary market **mechanisms. A Thinking Machines Lab co-founder steps down citing health issues, but quickly takes a job at OpenAI. The Trump administration bans Chinese robots. Google DeepMind’s AlphaFold team sees a personnel shakeup and a few notable departures. Live-shopping app Whatnot offers a sign of life for consumer dealmaking.
The Main Item
As Markets Wobble, Circular Financing & Leveraged Bets Ramp up the Risks #
The rapid retreat of AI and chip stocks over the past couple of weeks has exposed the fragility of an AI funding boom that’s drawing capital from every corner of the financial system — and is increasingly reliant on debt.
Situational Awareness, the much-touted San Francisco hedge fund led by 25-year-old wunderkind Leopold Aschenbrenner, this week provided an object lesson in the risks. Less than two months ago, the former OpenAI researcher was being celebrated by the * Wall Street Journal* for his prescience in seeing the AI opportunity early and turning a few hundred million dollars into well over $20 billion in less than two years. (The firm’s net asset value
reportedlyreached $45 billion at its height.) On Thursday, he was forced to sell the fund’s public stock portfolio to Citadel after margin calls had left it in a liquidity crisis.
The accelerationist-leaning pseudo-anonymous account @beffjezos called the incident a “huge hit for EA-adjacent rationalist former big lab alignment researcher kind” and many meme-d Citadel’s **Ken Griffin **into the grim reaper of speculative investing.
It’s not that Aschenbrenner’s bets were wrong, exactly: the infrastructure and chip plays at the heart of the portfolio, including names like SanDisk, SK Hynix and CoreWeave, are still trading far above where they were a year ago. He himself has always spoken of the AI build-out as a long-term opportunity.
But “conviction” in this case meant levering up the wagers with borrowed money, and thus declines on the order of 30% on core holdings created a sudden cash crisis. It’s a reminder of how quickly fortunes can turn in an AI trade where valuations — and thus expectations — remain sky high, and risk is often stacked upon risk.
A similar red flag in that regard comes in the form of the latest wave of multi-billion-dollar Nvidia investment deals. This week, it was a $5 billion commitment to Ilya Sutskever’s Safe Superintelligence, much of which will be used to buy Nvidia gear.
Nvidia is reported to be discussing a loan guarantee for OpenAI of as much as $250 billion, also tied to Nvidia hardware.
That’s on top of $90 billion in corporate VC investments over the last 16 months alone, per the Financial Times. Nvidia participated in 283 funding rounds between 2021 and 2025, with 85% of those investments in AI startups, according to Crunchbase.
The Bank of Jensen
In many cases, these investments involve Nvidia essentially providing the money for customers to buy its hardware. Indeed, CEO Jensen Huang has been so aggressive in funding the AI ecosystem that the company is functioning almost like a bank; with annual free cash flow nearing $100 billion and little debt, that isn’t obviously reckless.
Yet such vendor financing, though it has plenty of precedents, is what brought down Lucent and much of the rest of the telecom equipment industry in the early 2000s after the first dot-com bubble burst.
Nvidia’s defenders point out that many of its deals are collateralized by the hardware, so if the company fails Nvidia gets the gear back. In a bust scenario, though, those chips would be worth a fraction of their current value.
Huang has proven himself a tech CEO for the ages, and an AI visionary. He’s also been exceptionally good at turning that into money. But banking is a different business. And as Aschenbrenner just demonstrated, seeing around corners doesn’t always guarantee success.
Nvidia’s frenetic deal-making is just one of the ways in which the AI buildout has upended the traditional start-up financing playbook. As we noted last week, corporate venture investing has exploded in recent years, and accounted for almost 90% of all VC dollars that have gone into AI firms this year. That’s compared with less than 50% of VC dollars a decade ago.
New types of financial players are also making this cycle different.
From Wall Street to Jane Street
While hedge funds such as Coatue and mutual fund companies including Fidelity started getting involved in late-stage venture deals more than a decade ago, Situational Awareness was part of a fresh wave of investment firms encroaching on traditional VC territory. The secretive Wall Street firm Jane Street, which traditionally made its money from proprietary trading algorithms, is on the cap tables of Anthropic, chipmakers Etched and MatX, and AI cloud infrastructure heavyweight Fluidstack. (It also had money with Aschenbrenner.)
Jane Street is interested in AI tech not just as investment, but for internal use: it invested $1 billion in CoreWeave and signed a $6 billion commitment to use its cloud platform for all of its machine learning needs. It’s also in the process of financing its own AI data center.
Big money managers and private credit firms including Goldman Sachs Asset Management, Blackstone, and Blue Owl Capital have also emerged as major funders of the AI buildout, extending loan packages in the tens of billions for data centers.
Part of this is simply a function of the enormous amounts of capital needed for AI data centers and chips. But for strategic investors, there are many other reasons to play the venture game.
Plumping up potential customers is one obvious benefit. An investment could also yield access to premier AI tools ahead of the competition, and help keep a funder abreast of the latest developments. There’s also the chance of a windfall: Google recorded an incredible $99 billion gain on its equity investments in Q2, mainly from gains on Anthropic and SpaceX.
“Enterprise software companies in particular often feel real urgency to invest in and sometimes acquire AI startups to stay competitive and defend their market share,” PitchBook senior research analyst **Kaidi Gao **told us.
Fear and greed continue to draw new corporate players into AI startup investing. Schneider Electric, for example, a 190-year old energy and industrials firm, is channeling capital from its €1 billion venture fund, SE Ventures, almost entirely into AI startups.
The $700 million Series A for Figure founder **Brett Adcock’s **new AI neolab Hark shows the new state of play: investors include Nvidia, AMD Ventures, ARK Invest, Brookfield, Intel Capital, Qualcomm Ventures, and Salesforce Ventures.
Newcomer Podcast
John Coogan on Selling TBPN to OpenAI, Sam Altman & the Future of Tech Media #
One Big Chart
SPVs Outpace Direct Sales for Secondary Share Sales So Far this Year #
Investors are increasingly turning to Special Purpose Vehicles, or SPVs, to purchase shares of Silicon Valley’s most sought-after private startups, rather than buying shares directly from employees or other investors.
A new PitchBook report showed that single-layer SPVs have surpassed direct-to-cap-table trades in secondary deal volume on the trading platform Caplight so far this year.