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How Leopold Aschenbrenner, the ‘golden child’ of the AI trade, was laid low
The $20bn hedge fund manager’s wild ride ended with a call to Ken Griffin
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Amelia Pollard, James Fontanella-Khan, Ortenca Aliaj, Kate Duguid and Jill R Shah in New York, George Hammond in San Francisco and Costas Mourselas in London
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Leopold Aschenbrenner made his name on his ability to predict the future. But the trader dubbed the “Nostradamus of AI” would have been hard-pressed to foresee how quickly his high-flying hedge fund would run into trouble.
The OpenAI alumnus, with no trading experience, had over two years become a Wall Street sensation, racking up gains of over 400 per cent for his more than $20bn hedge fund Situational Awareness in the first six months of this year alone.
But his debt-fuelled bets on a dazzling future for AI put Aschenbrenner on the wrong side of a brutal market sell-off in recent weeks.
A drumbeat of pressure from the fund’s bankers, and efforts to rapidly sell chunks of its portfolio, culminated late Wednesday night when Aschenbrenner got on the phone with Citadel’s Ken Griffin.
The 25-year-old wunderkind and one of Wall Street’s most feared investors hammered out a deal to sell much of Situational Awareness’s portfolio to Griffin’s hedge fund.
Citadel’s swoop for the bulk of Situational Awareness’s public stock holdings, which were once estimated at $16bn, beat out rivals Millennium Management and Jane Street and marks one of the largest and most sudden stock transactions in Wall Street history.
The firm’s rapid downward spiral is a familiar tale, as Silicon Valley and Wall Street once again threw their weight behind a bright-eyed but untested investor who promised this time would be different.
“Everybody always wants to find the next golden child,” said one longtime hedge fund executive. “It just keeps happening.”
Situational Awareness and Aschenbrenner did not respond to requests for comment.
Aschenbrenner captivated his investors with bold ideas about AI drawn from his network comprising effective altruism adherents — the controversial “do good” philosophy whose devotees populated both the collapsed crypto exchange FTX and AI powerhouse Anthropic.
After graduating from Columbia University at 19, he briefly worked for the FTX Future Fund, the philanthropic arm of Sam Bankman-Fried’s empire before it collapsed in late 2022 in a multibillion-dollar fraud case.
Around this time Aschenbrenner met his wife-to-be Avital Balwit, who now works as chief of staff to the CEO of Anthropic. He later joined OpenAI’s “Superalignment” team before being fired over an alleged leak.
Aschenbrenner’s career took a turn in 2024 when he wrote a 165-page treatise on how AI, and especially artificial general intelligence, would dramatically reshape society in the coming years.
The essay, titled “Situational Awareness”, took off. Aschenbrenner capitalised on his newfound popularity by raising money for a hedge fund, with anchor investments from GitHub chief executive Nat Friedman and Patrick and John Collison, who founded Stripe.
The Gen Z investor — who was described as the “Nostradamus of AI” as recently as last month — brushed off a question about whether he would succumb to the same fate as others, such as tech billionaire Peter Thiel’s hedge fund, which collapsed during the 2008 financial crisis.
“Obviously not blowing up is sort of like task number one and two, or whatever,” Aschenbrenner said during the fourth hour of a popular tech podcast in 2024, a few months before he officially launched his fund. “Done right, I think a lot of money could be made.”
Situational Awareness’s assets snowballed to $24bn, as Aschenbrenner poured money into bets on the winners of the AI trade.
But by July some of the hedge fund’s biggest stock positions, according to its last regulatory filings, appeared to be collapsing.
The fund — run by seven investment professionals and 20 employees — at one point held hundreds of millions of dollars in Bloom Energy and Sandisk, which had fallen about 40 per cent since the end of June to the start of this week.
When Intel reported strong earnings on July 23, its share price surprisingly fell and speculation began to mount that someone was aggressively selling into the market.
That seller was Aschenbrenner, according to multiple people familiar with the matter. “He was trying to recover his losses,” one of the people said. “He had the illusion of still being in control . . . he didn’t have control at all.”
The rapid downward spiral of Situational Awareness has familiar precedent in Silicon Valley© Jason Henry/Bloomberg
Despite the AI rout, Aschenbrenner on July 24 sent his investors a letter that rattled off the fund’s wild returns — 439 per cent for the year to the end of June, 1,551 per cent since its founding — before giving a hint that trouble was already brewing.
“It’s more important than ever to recognise the potential for volatility in the future,” he wrote. Aschenbrenner acknowledged that his firm had not been “immune” to the recent tech sell-off but said the unwinding in the market was a “particularly good time to add funds”.
Two investors who spoke with the FT at the time said they felt reassured by the letter.
But shortly after, the situation at the fund had deteriorated. Aschenbrenner called a number of investors to solicit fresh capital or sell certain assets, according to people with knowledge of the process. The calls were ad hoc, offering direct investors different deals.
“He was offering me a deal and a completely different one to another investor,” said a person who was called by the hedge fund seeking help.
Some of the Wall Street banks that had extended financing against Aschenbrenner’s portfolio had already been on alert. Lending to hedge funds had become extraordinarily lucrative, making up an ever-bigger portion of banks’ balance sheets.
But at least one prime broker put Situational Awareness on a “watch list” due to the highly volatile and concentrated nature of its bets on AI stocks.
The prime broker called for additional margin to support its positions several times over the past year, according to an executive at the bank, including this week.
“People on our side were not comfortable with the exposure given the portfolio composition and credit profile [of the firm],” said the executive.
Ken Griffin was said to be ‘heavily involved’ in the negotiations around a sale of all or large chunks of Situational Awareness’s portfolio © Aaron Schwartz/Bloomberg
By Wednesday, Situational Awareness’s troubles came to a head. As tech stocks continued to fall further, investors complained that they could not get through to Aschenbrenner’s fund.
“Leopold just stopped taking calls,” said one investor in the fund.
Instead, Aschenbrenner was talking to some of Wall Street’s most aggressive operators — Jane Street, Millennium and Citadel — seeking a swift deal to sell all or large chunks of the portfolio, said people briefed on the matter.
Jane Street had earlier backed the fund, in a rare move for the proprietary-trading outfit, and is among investors facing losses.
Several other financial groups also began circling Situational Awareness’s assets on Wednesday evening, and were in discussions to potentially buy certain portions of its private stake holdings, according to two people familiar with the matter.
Multiple investors said Aschenbrenner was exploring a sale of some or all of his coveted Anthropic stake, though at a premium to its last valuation of $900bn.
Citadel’s billionaire founder Griffin was “heavily involved” in the swirl of negotiations, which lasted through the night. Shortly after dawn, Citadel emerged with a deal.
Situational Awareness was left with a small slice of unlevered public stock holdings and its private stakes, according to two people familiar with the matter. One person close to the firm said it “wasn’t over”.
Another person involved in the negotiations said the question left by the episode was not how the deal was structured, or how much money Citadel would make on the transaction, or where Situational Awareness would go from here.
“The real question is how did anyone invest so much money, and then lend so much money, to a . . . kid with no personal experience and no infrastructure?”
Additional reporting by Rafe Rosner-Uddin in San Francisco
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