A 24-Year-Old's AI Hedge Fund Just Lost $35 Billion. Here's How It Happened.
Situational Awareness LP bet everything on artificial intelligence stocks, called it obvious, and watched its value collapse from $45 billion to $10 billion in a matter of weeks.
Key points
- Situational Awareness LP, an AI-focused hedge fund, fell from $45 billion to roughly $10 billion in value after a brutal stretch for AI stocks in mid-2025.
- The fund sold most or all of its public stock portfolio to Citadel, the investment firm run by billionaire Ken Griffin.
- If confirmed, losses of around $35 billion would be more than four times Archegos Capital Management's $8 billion wipeout in ten days in 2021.
- The fund was founded by Leopold Aschenbrenner, a 24-year-old former OpenAI employee with no prior money-management experience.
- Backers included Stripe co-founders Patrick and John Collison, two senior Meta AI figures, and Jane Street, one of Wall Street's most respected trading firms.
The fund was called Situational Awareness. Its pitch was simple: artificial general intelligence, the theoretical point at which machines outperform humans at essentially everything, was arriving by 2027. So the smart play was to pile into AI stocks and wait for history to vindicate you.
History had other ideas.
According to reporting by The Verge AI, Situational Awareness LP entered July 2025 managing around $45 billion. A few terrible weeks for AI stocks later, the number is closer to $10 billion. The fund sold most, possibly all, of its public-market holdings to Citadel, controlled by billionaire Ken Griffin.
For context: Archegos Capital Management lost $8 billion in ten days in 2021, which The Wall Street Journal called the previous record for rapid trading losses on Wall Street. Situational Awareness appears to have lost more than four times that.
Who started this, and why did serious people back it?
The man behind the fund is Leopold Aschenbrenner. He graduated as Columbia University's valedictorian at nineteen, worked at the FTX Future Fund (the charitable arm of collapsed crypto exchange FTX), then spent roughly a year on OpenAI's superalignment team before being fired for allegedly leaking internal information.
Two months after leaving OpenAI, he published a long essay series also called Situational Awareness, arguing that superintelligent machines were imminent and that most investors hadn't noticed. The essays attracted a grant from economist Tyler Cowen's Emergent Ventures programme and brought in some of Silicon Valley's biggest names.
Backers included Patrick and John Collison, who co-founded payments company Stripe, along with Daniel Gross and Nat Freedman, both senior figures in Meta's AI division. Jane Street, the trading firm known for quantitative talent, also invested. As The Wall Street Journal noted in June, that was unusual: Jane Street almost never backs outside money managers.
None of it changed the fact that Aschenbrenner had never managed money before. As we noted when we first covered this story on 30 July 2026, concentrated AI bets were already making investors uneasy that summer.
What went wrong?
The fund's four investment professionals concentrated their bets on a small group of AI-linked stocks. At the end of the first quarter, its largest positions included Nebius Group, Sandisk, Micron and CoreWeave. All four fell more than 35 percent in the month the fund unravelled.
Hedge funds typically borrow additional money to magnify their bets, a strategy that multiplies losses just as fast as it would multiply gains. The fund had a total staff of eight.
Aschenbrenner had told a podcast interviewer in 2024 that "not blowing up is task number one and two." It's hard to read that line now without wincing.
| Metric | Figure |
|---|---|
| Fund value, start of July 2025 | $45 billion |
| Fund value after sale to Citadel | ~$10 billion |
| Estimated losses | ~$35 billion |
| Previous record (Archegos, 2021) | $8 billion in 10 days |
| Investment staff | 4 people |
| Largest stock positions (Q1 2025) | Nebius, Sandisk, Micron, CoreWeave |
Should you worry if you hold AI stocks?
If you hold AI stocks in a pension or personal account, this isn't a direct threat to you. But the same stocks that sank this fund are widely held, and concentrated bets on a single theme, made with borrowed money, by people who are absolutely certain they are right, rarely end quietly.
The broader lesson is older than AI. Social credibility and impressive backers are not a track record. The thing to watch now is whether any of the institutional investors on the other side of these trades start talking publicly. That's when the full picture usually emerges.
