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Insider reveals success and failure both due to AI
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- DeepHorus
In July this year, an AI hedge fund named "Situational Awareness" lost about 67% in a single month, evaporating nearly $30 billion, and was ultimately forced to sell assets due to margin calls, transferring a large number of leveraged positions to Citadel at a discount. The founder of this fund is 24-year-old Leopold Aschenbrenner—a former OpenAI researcher who rose to fame for accurately predicting the future of AI. Success due to AI, failure due to AI, his story has become the most dramatic footnote in this AI boom.
Aschenbrenner's resume is legendary. Born in Germany, he entered Columbia University at age 15 and became class valedictorian at 19. Before joining OpenAI's superalignment team, he worked in FTX's philanthropy department and witnessed the collapse of FTX. In 2024, he was fired by OpenAI for "improperly sharing internal information." He then published a 165-page essay, "Situational Awareness: The Decade Ahead," predicting that AGI was imminent and that AI would evolve from a software problem to a physical construction problem, causing a sensation in Silicon Valley. Well-known investors such as Stripe's co-founder became his early supporters.
Leveraging this reputation, Aschenbrenner founded a fund of the same name and began to validate his judgments with real money. He heavily bought AI infrastructure stocks such as SanDisk, Micron, and TSMC, while shorting traditional software companies like Adobe and AppLovin. Initially, the strategy was nearly perfect. The fund's size swelled from $1.5 billion last summer to over $45 billion in early July this year, with peak exposure nearing $100 billion after leverage. Banks including Goldman Sachs and JPMorgan Chase competed to provide financing, typically lending an additional $3 for every $1 of principal.
However, this high-leverage "Texas hedge" had a fatal flaw: both the long and short sides relied heavily on the same premise—that AI would develop as expected. In July, market sentiment suddenly shifted. SanDisk fell 47% in a single month, Micron fell 29%, while the shorted software stocks unexpectedly rebounded. Hit from both sides, the fund's net value collapsed, and banks promptly issued margin calls. According to The Wall Street Journal, as of the end of June, SanDisk and Micron together accounted for about 56% of the fund's U.S. stock holdings, an extremely high concentration that laid the groundwork for the blowup.
The market gradually sensed the crisis through unusual position movements. On July 29, Aschenbrenner began urgently selling approximately $5 billion worth of Anthropic shares at a 20% discount, giving buyers only 12 hours to decide. This move almost confirmed the fund's capital chain rupture. When everyone realized he was short on cash, the selling spree intensified, and ultimately the fund was forced to transfer its leveraged positions to Citadel at a discount.
This blowup event serves as a wake-up call for the AI investment boom. Aschenbrenner's failure was not due to misjudging the direction of AI, but rather overconfidence in his own judgment and neglect of changes in market sentiment. He used $45 billion to validate AI development but failed to control the risks brought by leverage. For investors following the AI narrative, this story reminds them: between technological vision and market reality, there is always a gap that must be carefully crossed.
