Leopold Aschenbrenner's AI-focused hedge fund, Situational Awareness, experienced a significant downturn in July, recording a 67% loss due to a rout in its AI stock holdings. This substantial loss led the fund to sell the bulk of its public stock portfolio to Ken Griffin’s Citadel to meet margin calls and address liquidity issues. Despite the heavy losses in July, the fund reportedly remains up approximately 80% for the year, and it has since removed all leverage from its portfolio.
The deal with Citadel involved the sale of the leveraged portion of Situational Awareness's public portfolio. Following this transaction, the hedge fund's assets slumped to about $10 billion, down from over $20 billion in late May. The remaining assets include private investments, notably a $5 billion stake in Anthropic PBC.
Situational Awareness had significant holdings in prominent AI names like Broadcom, Intel, CoreWeave, Bloom Energy, and Nebius Group NV, as well as an exposure to SK Hynix Inc. The forced unwinding of these positions, and similar actions by other stock-picking hedge funds, contributed to a broader market selloff in AI stocks. Analysts have noted that while Citadel's purchase provided a temporary relief rally for AI stocks, fundamental valuations remain elevated, and it's unclear if the worst of the selloff is over.
Aschenbrenner's fund, which launched in 2024 and had attracted notable backers like Jane Street and Stripe co-founders, capitalized on the AI sector's boom, achieving a 439% return from the start of 2026 until the end of June. However, its reliance on leverage, a common practice among hedge funds to amplify returns, backfired when the market moved against its positions, leading to margin calls and asset liquidation. The incident highlights the risks associated with highly leveraged bets in volatile sectors like AI.
