AI-focused hedge fund loses $35 billion in weeks after betting on speculative growth stocks

A 24-year-old former OpenAI employee’s AI-focused hedge fund, Situational Awareness LP, collapsed from a $45 billion valuation to $10 billion in weeks after selling most or all of its public stock portfolio to Citadel amid a market downturn in AI stocks.

The fund’s largest reported holdings at the end of the first quarter included Nebius Group, Sandisk, Micron, and CoreWeave, all of which declined by more than 35% in July, according to CNBC.

The previous record for all-time trading losses was held by Archegos Capital Management, which lost $8 billion in 10 days in 2021, per The Wall Street Journal. If the reported figures hold, Situational Awareness’ losses would exceed that by a wide margin.

The fund’s investment thesis was publicly framed around essays predicting artificial general intelligence by 2027, written by its founder, Leopold Aschenbrenner. The essays argued that machines would soon surpass human reasoning and trigger unprecedented national security dynamics.

Aschenbrenner’s essays were widely circulated in Silicon Valley, with some figures praising them as insightful syntheses of high-level conversations, while others in finance and AI communities dismissed them as facile and speculative.

Situational Awareness LP was backed by prominent technology investors, including Patrick and John Collison of Stripe and two Meta AI leaders, according to the report.

The fund’s name and public posture—positioning itself as a “brain trust on AI”—drew scrutiny as its portfolio unraveled, with critics highlighting the mismatch between its grandiose claims and its performance.

The episode has drawn attention to the risks of untested investment theses tied to AI narratives, particularly when promoted by first-time fund managers with limited track records.