The man who wrote the defining case for the AI boom just got wiped out betting on it. Situational Awareness, the hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, has been forced to sell off its portfolio of public stocks after steep losses. Ken Griffin’s Citadel has bought the lot.
The collapse was first reported by CNBC’s David Faber. The fund’s prime brokers had been scrambling to raise cash to meet margin calls, he said. The whole public book went in one enormous trade. Roughly two-thirds of the fund’s assets were public equities, held long and shorted. The Wall Street Journal reported that the rival firm Millennium had also bid for the book.
The trade that broke #
The fund made one big, leveraged bet: that the AI build-out would keep lifting the companies supplying its chips, memory and power. That trade turned hard. Its positions in memory maker Micron, SK Hynix, Sandisk, Nebius and CoreWeave unravelled fast.
The damage was brutal. Nebius, where the fund disclosed a multi-billion-dollar stake in May, has fallen about 48 per cent from its peak. That erased roughly $35bn in market value. Sandisk is down 56 per cent in barely a month. The fund had also bet against software, and shorts in names like Adobe moved the wrong way, squeezing it from both sides.
It was, in effect, the long-chips, short-software trade that has defined this year, taken to an extreme with borrowed money. Leverage turned a bad month into a crisis. The Financial Times reported the fund used borrowing to magnify returns, a strategy that amplifies losses just as fast. Bank of America, Goldman Sachs and JPMorgan were left marketing its positions.
From $225m to a fire sale #
The speed of the rise makes the fall more striking. Aschenbrenner launched the fund in 2024 with about $225m, backed by the Stripe founders, Nat Friedman, Daniel Gross and the trading firm Jane Street.
It grew past $20bn, and CNBC reported it swelled to as much as $45bn at the start of July. It was up 439 per cent in the first half of the year.
It ran on a skeleton crew. According to The Verge, the fund had eight employees, only four of them investment professionals. Aschenbrenner had no prior trading experience before launching it. He does have a following: more than 250,000 people on X.
The tone did not shift as the losses mounted. In a 24 July letter to investors, seen by the FT, Aschenbrenner said the fund had “not been immune” to the sell-off. He then called it one of the best buying windows since early 2025. A postscript invited clients to add fresh cash on 1 August.
Anthropic survives the wreck #
One large bet is still standing. Situational Awareness keeps its private holdings, and the biggest is a stake in Anthropic, which the FT valued at about $5bn. The firm will carry on as a private investment vehicle, essentially an Anthropic holding company with a hedge fund attached.
Reports that it was shopping the Anthropic stake are “not accurate,” a spokesman told CNBC. There is a neat irony in what remains. Aschenbrenner is engaged to Avital Balwit, the chief of staff to Anthropic’s chief executive, Dario Amodei.
The oracle’s thesis on trial #
This is a personal blow to one of the most watched figures in the AI trade. Aschenbrenner, now 25, was a Columbia valedictorian at 19 and worked on OpenAI’s Superalignment team before the company fired him in 2024.
His 165-page essay, “Situational Awareness,” gave the fund its name and the market its script. He declared that “the AGI race has begun,” and forecast trillion-dollar compute clusters and hundreds of millions of humming GPUs. It became the intellectual playbook for the entire infrastructure bet.
The essay was not wrong that AI needs more chips. The fund’s undoing was leverage, not the thesis, and there is a wrinkle. The very stocks it had to dump, SK Hynix and the rest, jumped sharply the next day. Some read that as a sign the forced selling had marked a short-term bottom rather than a verdict on the AI trade itself.
The comparisons wrote themselves. ZeroHedge dubbed it “Archegos 2.0,” after the family office that imploded on hidden leverage. Others reached for Three Arrows, the crypto fund that believed in its own supercycle. Commentators could not resist the obvious point, that a firm named Situational Awareness had missed the risk in its own book.
It was also, several noted, the second spectacular flame-out linked to Aschenbrenner. He once had a brief stint at Sam Bankman-Fried’s FTX philanthropy, the arm of the empire that collapsed with the crypto exchange.
One strand of the reaction deserves care. On X, traders spun a theory that Citadel had talked up a Fed rate rise to drive AI stocks lower, then bought Aschenbrenner’s book cheap. That is speculation, not established fact. What is confirmed is simpler and older: an eight-person fund used heavy leverage, the market turned, and a bigger firm picked up the pieces.
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