Leopold Aschenbrenner's Situational Awareness hedge fund, founded approximately two years ago by a former OpenAI researcher, experienced a severe reversal in July 2026. After achieving a remarkable 439% return for the year through June and growing to over $20 billion (and reportedly as much as $45 billion at its peak), the fund lost about 67% in July. This rapid decline led to significant pressure from its prime brokers, including Bank of America, Goldman Sachs, and JPMorgan Chase, who demanded additional collateral.
The fund's strategy involved concentrating on AI compute and power, with substantial leverage magnifying both its gains and subsequent losses. A first-quarter 13F filing indicated approximately $13.68 billion in notional exposure, including about $8.46 billion tied to put options on semiconductor ETFs and established tech companies, while holding long positions in volatile infrastructure operators. Key holdings that plummeted included memory chip producers SK Hynix and Sandisk, Bloom Energy, and Nebius Group, all of which fell over 30% in a month.
To address the margin pressure and avoid a deleveraging spiral, Situational Awareness was forced to sell the bulk of its public stock portfolio, valued at around $16 billion, to Ken Griffin's Citadel. This transaction, reportedly one of the largest rushed stock deals in Wall Street history, occurred after the fund unsuccessfully sought new capital and an appeal to clients for fresh money was ignored. Despite the public portfolio sale, the fund retained approximately $10 billion in assets, including private investments such as a $5 billion stake in Anthropic, which was last valued at $965 billion in May, and stakes in chipmaker MatX and AI data center startup.
The swift collapse highlights the risks of high leverage, especially in concentrated portfolios. While the fund remained up about 80% for the year even after the July losses, its inability to withstand short-term market reversals due to borrowed capital led to the forced liquidation. Analysts noted that the episode underscores the potential volatility and risks associated with aggressive AI-focused investments, particularly when financed with significant leverage, as public investors questioned whether massive capital expenditures in AI infrastructure would translate into near-term revenue.
