Analysis
Situational Awareness, the AI-focused hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, has been forced into a sweeping unwind of its public stock positions after a historic momentum reversal in AI-adjacent names triggered margin calls the fund couldn't meet without selling. Assets under management fell from roughly $45 billion to about $10 billion in a matter of weeks, according to reporting on the collapse.
The mechanics of the unwind are as notable as its speed. Aschenbrenner reportedly ran the fund with leverage as high as 400%, concentrated in AI-infrastructure momentum trades -- long positions in chipmakers like SK Hynix and neoclouds like CoreWeave, paired with short positions in software names such as Adobe that the fund believed would underperform AI-native competitors. When semiconductor stocks reversed sharply, both sides of that book moved against the fund simultaneously, and its leverage turned a painful drawdown into a forced liquidation. Ken Griffin's Citadel reportedly bought a chunk of the fund's leveraged public positions at a discount as part of the unwind.
One detail stands out as a signal of conviction: Situational Awareness kept its Anthropic shares even while liquidating nearly everything else in its public portfolio. Anthropic sits in the fund's private, illiquid holdings rather than its leveraged public book, and Aschenbrenner appears to have treated it as a distinct, higher-conviction bet worth preserving even under duress -- a decision that will be closely watched if Anthropic's own IPO process advances later this year.
“Ken Griffin's Citadel reportedly bought a chunk of the fund's leveraged public positions at a discount as part of the unwind.”
The fund's rise and fall track an unusually compressed arc even by AI-era standards. Aschenbrenner built his public profile and initial investor base on 'Situational Awareness,' a lengthy 2024 essay arguing AI progress would compound faster than most of the industry expected. The fund he subsequently launched returned more than 1,000% since inception before this month's reversal, a track record that drew both admiration and scrutiny given Aschenbrenner's lack of traditional money-management experience and past ties to FTX.
For LPs and allocators, the collapse is a pointed reminder that a correct macro thesis -- AI infrastructure spend compounding rapidly -- does not protect a portfolio from leverage-driven liquidation if the trade's timing and structure are wrong, even briefly. A fund can be right about the decade and still be forced to sell everything in a bad week.
What to watch: whether Situational Awareness raises fresh capital to rebuild its public book, whether its remaining Anthropic stake becomes a template other AI-adjacent funds try to replicate as a hedge against public-market volatility, and whether this episode accelerates scrutiny of leverage levels across the broader wave of AI-themed hedge funds that launched in the past two years.
