'AI Nostradamus' Fund Lost $35 Billion in a Month

As recently as June, the Situational Awareness fund was posting a 439 percent year-to-date gain, and its 24-year-old founder was being hailed as the investment genius of the artificial intelligence era. A month later, the fund's assets had shrunk from a peak of $45 billion to roughly $10 billion, and Leopold Aschenbrenner was forced, in overnight negotiations, to sell most of his stock portfolio to a Wall Street rival.

The fund itself was a direct result of the attention that essay brought Aschenbrenner. The piece, published in June 2024 shortly after OpenAI fired him over alleged improper disclosure of internal information, predicted a rapid advance of artificial intelligence toward superintelligence before the end of the decade. The essay caused a sensation in Silicon Valley, and Aschenbrenner quickly raised capital from prominent tech investors, including Patrick Collison and Nat Friedman.

From 439 Percent to a Forced Sell-Off

The fund's strategy relied on heavily leveraged, concentrated bets on companies tied to AI infrastructure, mainly memory and chip makers, while shorting software companies that Aschenbrenner believed would be displaced by AI labs. By midyear the strategy was working brilliantly: the fund posted a 439 percent return in the first half of the year and 1,551 percent since its founding in 2024.

The collapse came in July, when a decline in tech stocks, accelerated in part by weaker results from Intel, triggered margin calls from the banks financing the fund's leveraged positions. Shares of SK Hynix, SanDisk, Bloom Energy and Nebius Group fell more than 30 percent within a month, while Adobe, which the fund had shorted, rose against Aschenbrenner's forecasts. In a letter to investors dated July 24, he admitted outright, "we failed you this month," yet still urged clients to add capital, calling the sector sell-off "one of the most attractive opportunities."

We failed you this month - Leopold Aschenbrenner, founder of Situational Awareness, in a letter to investors

An Overnight Deal With Citadel

As the situation worsened, Aschenbrenner first tried to raise fresh capital from existing and new clients, then stopped taking calls from some of them. In the end, over roughly 24 hours of negotiations, the fund sold most of its public stock portfolio to Citadel, Ken Griffin's $71 billion asset manager, which outbid Millennium Management in the talks. The deal was described as one of the largest and most sudden stock market transactions in Wall Street history.

The fund did keep the private investments it had not sold to Citadel. The most valuable is its stake in Anthropic, now worth about $5 billion, based on Anthropic's May funding round that valued the company at $965 billion. Aschenbrenner also still holds stakes in chipmaker MatX and AI data center startup Fluidstack. An added wrinkle to the whole story is his personal ties to Anthropic: he is engaged to Avital Balwit, the company's chief operating officer.

Relief on the Nasdaq

News of the Citadel deal produced an immediate market reaction. The Nasdaq 100 gained more than 3 percent as investors realized the pressure of a forced sell-off, which had threatened to deepen the slide in AI-related stocks, had lifted. Earlier concerns about the fund's health had been fueled by a string of weaker readings from tech companies, including Intel's decline in late July.

Aschenbrenner's story has become, in the United States, a case study in the risks accompanying the AI investment boom. A fund that just weeks earlier had been boasting record returns showed how quickly leveraged, concentrated bets on a single sector can turn into a liquidity crisis threatening the broader market. Commentators note that Aschenbrenner's young age and lack of prior investing experience, he had previously worked only as a researcher at OpenAI and briefly at a charitable organization linked to FTX, did not stop him from raising one of the largest and fastest-growing hedge funds of recent years.

For Polish investors and companies tracking the AI market, the episode is a warning against treating sharp valuation surges in AI-related stocks as a guaranteed trend. Exposure to single links in the supply chain, such as memory or chip makers, proved in July to be just as risky as it had looked promising a month earlier. The affair could also affect banks' and brokers' appetite for financing highly leveraged funds concentrated in a single hot sector.

Aschenbrenner himself has not publicly commented on the details of the agreement with Citadel beyond the official letter to investors. The fund also has not disclosed whether it plans to rebuild its public market positions in the coming months or focus solely on managing its remaining private investments, including the Anthropic stake, which cannot be sold until after the company's planned IPO in October 2026 or later.