The man who wrote the AI-boom bible just got margin-called out of it
Situational Awareness, the AI-focused hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, has been forced to sell its entire portfolio of public stocks to Ken Griffin’s Citadel after steep losses. A leveraged bet on AI infrastructure and against software collapsed on it from both sides. The fund keeps its roughly $5bn Anthropic stake and will carry on as a private investment firm.
July 30, 2026 - 4:18 pm
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. 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.
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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 priv
The recent margin call and sale of Situational Awareness' portfolio offer valuable insights into the risks and realities of the AI boom. As the fund's steep losses demonstrate, overleveraged bets on AI infrastructure and software can quickly turn into a crisis. This event highlights the need for caution and diversification in AI-focused investment strategies. Despite the setbacks, the AI industry's long-term potential remains significant, with ongoing advancements in fields like natural language processing and robotics. Looking ahead, the AI landscape is poised for evolution, with regulatory scrutiny and ethical considerations coming to the forefront. As the industry matures, investors must adapt their approaches, focusing on sustainable growth and robust risk management frameworks. The fall of Situational Awareness serves as a reminder that the path to AI's mainstream adoption is likely to be fraught with challenges, but also filled with opportunities for those who navigate it wisely. Your next privacy breach might not leak any data at all