Leopold Aschenbrenner, a 24-year-old former OpenAI researcher whose AI-focused hedge fund had returned as much as 439% earlier this year, was forced to liquidate nearly all of his fund’s public stock holdings this week in a distressed sale to Citadel after leveraged bets on artificial intelligence stocks unraveled, according to people familiar with the matter cited by CNBC.
Who is Leopold Aschenbrenner
Aschenbrenner rose to prominence in AI policy circles before he ever managed money. A former OpenAI safety researcher, he was dismissed from the company in 2024, and later that year he published “Situational Awareness,” an influential essay series forecasting rapid progress toward artificial general intelligence that circulated widely among technologists and policymakers. He is a graduate of Columbia University and has publicly described previously working alongside Sam Bankman-Fried before joining OpenAI.
After leaving OpenAI, Aschenbrenner founded Situational Awareness LP in mid-2024, naming the hedge fund after his own essay. He secured anchor investments from prominent technology figures including Stripe co-founders Patrick and John Collison, and former GitHub CEO Nat Friedman alongside investor Daniel Gross, according to his own website. The New York Times reported the fund launched with roughly $100 million from these early backers before he had turned 23.
How the fund grew so fast
Situational Awareness built its strategy around a concentrated bet on the physical infrastructure underlying the AI boom, semiconductors, data centers and power companies, while pairing those long positions with bearish wagers against software companies it viewed as vulnerable to AI disruption, including a prominent short position against Adobe. The fund’s assets under management ballooned rapidly, growing from roughly $154 million to a peak of $45 billion by the start of July, according to figures reported by CNBC and detailed in a widely circulated Substack analysis by Tae Kim.
By the end of June, the fund’s aggressive positioning had paid off spectacularly: Situational Awareness was up 439% on a net basis for the year, according to the Financial Times, reporting cited by Kim’s analysis. That performance made Aschenbrenner one of the most closely watched young managers in an AI-obsessed hedge fund landscape, with a personal net worth that reportedly reached as high as $46 billion at its peak.
What triggered the collapse
The fund’s fortunes reversed abruptly in July. According to the Financial Times report cited by Kim, Situational Awareness suffered “heavy losses” that month and sent investors a warning letter on July 24 disclosing the trouble. In the following days, several of the fund’s top holdings, including chipmaker SK Hynix and AI cloud provider CoreWeave, fell 30% or more as a broader selloff hit AI infrastructure stocks.
The damage was magnified by leverage. CNBC and the Financial Times both reported that Situational Awareness had borrowed heavily to amplify its bets, with leverage estimated at as much as four times the fund’s capital, a strategy that can supercharge gains in a rally but accelerates losses just as quickly during a downturn. As its long positions in AI infrastructure names declined and its short bet against Adobe moved against it simultaneously, the fund faced escalating margin calls from its prime brokers, reported to include Goldman Sachs and JPMorgan.
The Citadel fire sale
Unable to meet those margin calls through ordinary means, Situational Awareness was forced into an emergency, wholesale liquidation. CNBC’s David Faber first reported that the fund exited its entire public stock book, both long and short positions, in a single massive block trade, and the Wall Street Journal subsequently identified Ken Griffin’s Citadel as the buyer, acquiring the bulk of the leveraged portfolio at a discount to market prices.
Quartz reported that the fund’s total assets fell from a July 1 peak of $45 billion to roughly $10 billion by the end of the week, a decline of approximately $35 billion in a matter of days. Aschenbrenner, in an unaudited estimate shared with investors, disclosed a month-to-date loss of 67% even as the fund remained up 80% for the year overall, reflecting how dramatically the earlier gains had been erased.
What happens now
Aschenbrenner has said the fund itself has not shut down, been liquidated entirely, or converted into a private-only vehicle, and that it continues operating as a hybrid public-private fund following the sale. He indicated the firm’s private AI investments, reportedly including a stake in Anthropic, will continue, while the remaining public portfolio will now consist only of fully paid-for long positions with no borrowed leverage or short exposure.
In a letter to investors described by Seeking Alpha as a “mea culpa,” Aschenbrenner acknowledged the fund’s leveraged strategy had backfired badly and told backers “we let you down,” while committing to avoid leverage and naked short positions going forward.
The episode has quickly become a cautionary case study within the AI investing world, illustrating how the same leveraged strategies that produced extraordinary returns during 2026’s AI infrastructure boom left even a fund run by one of the industry’s most closely watched young voices exposed to a rapid and severe unwind when sentiment shifted.