Leopold Aschenbrenner's hedge fund, Situational Awareness, which managed approximately $45 billion, imploded in a matter of weeks due to a historic momentum reversal. The fund had built highly concentrated positions in AI beneficiaries such as Nebius, Bloom Energy, Sandisk, CoreWeave, SharonAI, and IREN, which plummeted between 50% and 78% from recent peaks. Simultaneously, its short positions in software firms like Adobe rallied, meaning the hedges failed to protect the fund, leading to losses on both sides of its portfolio.
The rapid decline in portfolio value triggered margin calls from prime brokers, including Bank of America, Goldman Sachs, and JPMorgan Chase. To meet these demands, the fund was forced into a sweeping reduction of its listed-stock positions, creating a deleveraging spiral. Ultimately, Ken Griffin's Citadel hedge fund stepped in to acquire Situational Awareness's publicly traded assets.
The collapse occurred amidst a seemingly tranquil S&P 500, masking one of the most violent market leadership reversals in decades. Morgan Stanley's sector-neutral Momentum Index recorded its worst decline on record, tumbling 17.4% in just four trading days. Analysts like Jonathan Krinsky of BTIG described it as the "largest/fastest momentum crash in modern history."
Despite a rebound in AI infrastructure stocks following the forced unwind, prominent skeptics like Michael Burry of "The Big Short" fame remain bearish. Burry, who has been vocal about the AI boom being sustained by financing rather than end-user demand, used the rally to add to bearish positions in Micron, the VanEck Semiconductor ETF, and Nvidia put options. Other market observers like Bob Lang of Explosive Options noted that such deleveraging spirals are common when investors become over-leveraged.
Leopold Aschenbrenner, a former OpenAI researcher, had quickly become a watched figure in AI investing due to eye-popping returns, with the fund reportedly up over 400% this year at one point. The fund's largest holdings at the end of the first quarter included Nebius Group, Sandisk, Micron, and CoreWeave, all of which were down more than 35% in the month leading up to the crisis.
