Leopold Aschenbrenner's hedge fund, Situational Awareness, experienced a dramatic downturn, with its total assets plummeting from $45 billion to approximately $10 billion in July. This collapse was triggered by a historic momentum reversal, impacting its highly leveraged portfolio which was concentrated in AI infrastructure companies on the long side and bearish bets on software companies on the short side. Public positions, including Nebius Group, Sandisk, Micron, and CoreWeave, shed over 35% of their value, and some, like Bloom Energy and SharonAI, fell by 50% to 78% from recent peaks. The fund had used as much as 400% leverage, and when the portfolio value fell, prime brokers issued margin calls, forcing the fund into a deleveraging spiral and compulsory sales.
To survive, the fund reached an agreement with Ken Griffin's Citadel to divest most of its publicly traded holdings, freeing it to settle debts with lenders while preserving private investments. Despite avoiding collapse, the fund is now attempting to rebuild. S3 Partners' data indicates the losses were due to concentrated positions and crowded trades, not predatory short-selling, as short interest in many top holdings was flat or declining.
In the aftermath, Leopold Aschenbrenner issued a letter to investors, pledging to learn from the experience and stating his personal investment alongside his backers. Just days after the near-collapse, Situational Awareness made a $400 million investment in an undisclosed privately held company, adding to a $100 million stake taken the prior month. Notable investors in Situational Awareness include Greenoaks founder Neil Mehta and Tiger Global Management's former head of public equities Feroz Dewan.
