Leverage crushes Aschenbrenner's $45bn AI fund in July
Leopold Aschenbrenner's Situational Awareness fund has lost roughly two-thirds of its value this month as concentrated, leveraged bets on AI infrastructure collapsed, forcing major banks to liquidate positions.
Situational Awareness, the AI-focused hedge fund run by 24-year-old Leopold Aschenbrenner, has lost approximately 67% of its value in July. The fund managed around $45 billion at the start of the month before a highly concentrated portfolio unravelled. Long positions in hardware stocks crashed, while short bets against established software companies moved sharply against the fund.
The rapid deterioration forced the fund's prime brokers to act. Bank of America, Goldman Sachs, and JPMorgan Chase are currently rushing to liquidate assets and raise cash to meet margin requirements. Aschenbrenner has since vowed to run his public stock portfolio without leverage while the firm reviews its risk management.
The fund's extreme volatility mirrors the broader swings in the AI trade. Aschenbrenner built the firm on the thesis that advanced AI systems would require a vast expansion of chips, memory, data centres, and electricity generation. This led to massive overweight positions in the physical supply chain.
That trade has turned severely toxic over the past few weeks. The fund's largest holdings—including SK Hynix, Nebius Group, SanDisk, Micron, and CoreWeave—are all down more than 35% this month alone. At the same time, short positions in companies like Adobe rebounded, creating a fatal squeeze on both sides of the book.
For market professionals, the collapse underscores the fragility of crowded, leveraged positions in the technology sector. Global markets had previously rallied aggressively on AI optimism as hyperscalers increased their capital expenditures. However, analysts have recently intensified their warnings about massive tech debt and infrastructure spending, questioning whether these investments will generate adequate returns. These concerns have sparked a sharp selloff across the sector.
Despite the severe July drawdown, Situational Awareness is still up roughly 80% for the year. In a client letter, Aschenbrenner took full responsibility for the losses. “We let you down this month,” he wrote. He attributed part of the decline to targeted short sellers aiming at his holdings.
Looking ahead, the founder promised a period of reassessment. “My core promise to you is that we will not waste the opportunity to learn from these events,” he wrote. Aschenbrenner was previously fired from AI startup Anthropic in 2024, a departure that remains disputed between company claims of information leaks and his assertions of raising security alarms.
