Situational Awareness, the hedge fund founded in 2024 by former OpenAI researcher Leopold Aschenbrenner, lost 67% of its portfolio value in July during a global selloff in AI-related stocks.
Aschenbrenner, now 24, has been described as an "AI prodigy" and a young stock-picking star on Wall Street. The report said the fund’s assets under management had at one point topped $30 billion, and that it had delivered strong investment results in the first half of this year. That performance was built on aggressive borrowing to amplify positions, combined with complex and expensive derivatives.
AI stock selloff hit both sides of the trade
In July, shares of AI companies held heavily by Situational Awareness fell sharply. At the same time, traditional technology stocks that the fund had shorted rebounded, leaving the portfolio under pressure from both directions and causing losses to widen rapidly.
In a letter to investors, Aschenbrenner said the episode brought the fund "extremely close to permanent capital impairment," and that the scale of the loss went far beyond its risk tolerance.
Fund sold most of its public stock portfolio
Facing heavy margin calls from Wall Street lending banks, Situational Awareness was forced into a large-scale asset sale.
Bloomberg reported that the fund reached an agreement with Citadel to sell most of its publicly traded stock portfolio at a discount. The transaction was aimed at repaying bank debt and easing margin pressure, while allowing the fund to retain private equity stakes in unlisted AI startups including Anthropic, Fluidstack, and MatX.
The selling reportedly cut the fund’s asset base from a peak of $45 billion in early July to about $10 billion. Aschenbrenner said the stock sales were necessary to keep the fund operating. He also said its future capital structure would be built to withstand shocks more effectively and that the firm would reflect deeply on the losses.
TechCrunch called it a warning sign in the AI boom
TechCrunch described the rise-and-fall pattern seen in funds like this as one of the clearest warning cases in the current wave of AI investment enthusiasm.
Anthropic stake remains central to any recovery
As the fund was going through severe turmoil and nearing collapse, Aschenbrenner still got married at an estate in Carmel Valley, California. His wife, Avital Balwit, is chief of staff to Anthropic CEO Dario Amodei. The report said he continued taking one-on-one calls with investors during the wedding period in an effort to steady confidence.
Situational Awareness has been backed mainly by wealthy family offices in Silicon Valley and on Wall Street. The source named investors including Greenoaks founder Neil Mehta, a foundation tied to XN founder Gaurav Kapadia, former Tiger Global Management executive Feroz Dewan, and D1 Capital founder Dan Sundheim. The report said there has not yet been a wave of large-scale redemptions.
The fund still holds an equity stake in Anthropic. The article said the AI company is expected to pursue an initial public offering at a valuation of as much as $2 trillion, and that this holding could become the decisive factor in whether Situational Awareness can recover performance in the second half of the year.
Headline mentions an SEC probe, but no details were included in the text provided
The source headline said the fund was also reported to be under SEC investigation. The body text supplied here, however, did not include details about the alleged probe, including its timing, scope, or subject matter.