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, the losses of around $35 billion would surpass Archegos Capital Management's record $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 researchers, 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 become smarter than 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 first covered in depth 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, the investment firm controlled by billionaire Ken Griffin.
For context: Archegos Capital Management, a family investment office that spectacularly collapsed in 2021, lost $8 billion in ten days and set the previous record for the largest rapid trading loss on Wall Street. Situational Awareness appears to have lost more than four times that amount.
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 briefly 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 yet. The essays earned fans in tech circles, attracted a grant from economist Tyler Cowen's Emergent Ventures programme, and brought in some of Silicon Valley's biggest names as backers.
Investors included Patrick and John Collison, who co-founded the payments company Stripe, as well as Daniel Gross and Nat Freedman, both senior figures in Meta's AI division. Jane Street, the trading firm known for attracting serious quantitative talent, also invested, which The Wall Street Journal noted was unusual given the firm almost never backs outside money managers.
None of this changed the fact that Aschenbrenner had never managed money before.
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 called leverage. When you borrow to bet and the bet goes wrong, the losses multiply just as quickly as the potential gains would have.
Aschenbrenner had told a podcast interviewer back in 2024 that "not blowing up is task number one and two." The fund had a staff of eight, four of them investment professionals.
| 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 |
What does this mean for ordinary investors?
If you hold AI stocks in a pension or personal investment account, this story is a useful reminder rather than a direct threat. You were not invested in Situational Awareness. But the same AI stocks that sank this fund are widely held, and concentrated bets on a single theme, made with borrowed money, by people who are very confident they are right, rarely end quietly.
The broader lesson is older than AI. Social credibility, a brilliant essay, and impressive backers are not the same thing as a track record.
