Leopold Aschenbrenner's AI-focused hedge fund, Situational Awareness, was forced to sell nearly its entire public stock portfolio to Citadel after heavy losses triggered by leveraged bets on AI infrastructure and margin calls. The sell-off came just days after the fund reported a 439% return for the first half of the year, a whiplash that stunned investors and observers alike.
Aschenbrenner, a former OpenAI researcher in his mid-20s with no prior trading experience, built the fund around a bold thesis: increasingly powerful AI would drive massive buildouts of chips, memory, data centers, and power infrastructure. That buildout is happening. But enormous spending and rising financing costs made investors question returns, triggering a sell-off that exposed the fund's fragile structure.
A Rapid Rise and a Steep Fall
The fund peaked at $45 billion in assets, a staggering figure for a firm with only eight employees, four on the investment side. Aschenbrenner used borrowed money, or leverage, to amplify his bets on AI infrastructure. When AI stocks fell, margin calls from banks forced an emergency sell-off. The market recovered shortly after the sell-off, leaving the fund to absorb losses at the worst possible moment.
Aschenbrenner called on investors to put in fresh capital by August 1, a deadline that now looms over the fund's future. Citadel, the hedge fund led by Ken Griffin, acquired the nearly entire public stock portfolio that Situational Awareness sold. Aschenbrenner is keeping his private holdings, including a stake in Anthropic, but the public fire sale marks a dramatic reversal for a fund that had been riding high.
From FTX to OpenAI
Aschenbrenner's path to this moment was unconventional. He started working for FTX Future Fund, the philanthropic arm of Sam Bankman-Fried's crypto exchange, in February 2022. He left before the exchange's collapse, a fortunate escape. In 2023, he joined OpenAI's "Superalignment" team, where he worked on AI safety. In April 2024, he was fired from OpenAI over an alleged information leak.
Aschenbrenner disputed the firing, saying he shared a largely harmless document with three outside researchers and had previously flagged security gaps at OpenAI. The dispute did little to slow his rise. In 2024, he published the essay "Situational Awareness," predicting rapid AI growth and gaining a large following. That same year, he launched the hedge fund named after the essay.
The Bet That Backfired
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The fund's thesis was not wrong, but its execution was. Falling stock prices at SK Hynix, a memory chip manufacturer, contributed to the losses. Aschenbrenner's bet against Adobe also backfired, adding to the damage. Leverage amplified losses and forced sales right before some stocks bounced back, a painful irony for a fund built on foresight.
The article's analysis suggests that Aschenbrenner's AI thesis could be correct, but his timing and leverage were not. The sell-off happened right before the market recovered, implying poor timing that compounded the fund's troubles. The heavy leverage turned a market dip into a crisis, forcing the sale of nearly the entire public portfolio.
A Question of Timing
The fund's collapse is a cautionary tale about the dangers of leverage in a volatile market. Aschenbrenner's conviction in the AI buildout was strong, and the buildout is indeed happening. But the financing costs and investor doubts that followed the spending spree proved too much for the fund's structure to bear.
The market's recovery shortly after the sell-off only underscores the timing problem. Had the fund held its positions, it might have weathered the storm. Instead, margin calls forced a sale at the worst moment, handing Citadel a portfolio that may now be worth more than what was paid.
What Remains
Aschenbrenner retains his private holdings, including a stake in Anthropic, suggesting he still believes in the AI future he has long championed. But the public portfolio is gone, and the fund's future depends on whether investors answer the capital call by August 1. The fund's peak of $45 billion now feels like a distant memory, a reminder of how quickly leveraged bets can unravel.
The story, reported by The Decoder on July 31, 2026, draws on sources including Financial Times, CNBC, and Wall Street Journal. It paints a picture of a young fund manager whose vision outpaced his risk management. Aschenbrenner's journey from FTX Future Fund in 2022 to OpenAI in 2023 and his firing in 2024 set the stage for a hedge fund that promised much but delivered a fire sale.