Former OpenAI researcher Leopold Aschenbrenner’s hedge fund, Situational Awareness, has been forced to unwind its publicly traded stock positions after suffering steep losses across AI infrastructure investments and short positions in software companies, according to people familiar with the matter.
The fund, which reportedly grew to as much as $45 billion at the beginning of July, has faced mounting liquidity pressure as several of its largest AI-related investments declined sharply. Citadel, the hedge fund founded by Ken Griffin, reportedly reached an agreement to acquire Situational Awareness’s publicly traded assets.
AI Infrastructure Bets Turn Against the Fund
Situational Awareness was built around a central investment thesis: increasingly capable artificial intelligence systems would require enormous spending on semiconductors, memory, data centers, computing infrastructure and electricity generation.
That strategy initially helped make Aschenbrenner one of the most closely watched investors in the AI sector.
However, recent declines across AI infrastructure stocks have put significant pressure on the portfolio.
One of the investments affected was South Korean memory-chip manufacturer SK Hynix, according to people familiar with the fund.
Regulatory filings showed that some of Situational Awareness’s largest publicly disclosed positions at the end of the first quarter included Nebius Group, Sandisk, Micron and CoreWeave. Each of those stocks reportedly fell more than 35% during the month.
Software Short Positions Add to Losses
The fund’s difficulties were compounded by positions betting against software companies.
Situational Awareness reportedly held short positions in companies including Adobe, expecting their shares to decline.
Instead, some of those positions moved sharply against the fund, adding to losses generated by falling AI infrastructure investments.
The combination created pressure on the highly leveraged portfolio and increased the amount of cash required to satisfy margin requirements.
Prime Brokers Move to Raise Cash
Several major Wall Street institutions serving as prime brokers to Situational Awareness have reportedly been working with the fund to manage its positions and liquidity requirements.
Those institutions include Bank of America, Goldman Sachs and JPMorgan Chase.
According to people familiar with the discussions, brokers were marketing groups of the fund’s long and short positions for sale as part of efforts to reduce exposure and raise liquidity.
It remains unclear whether the asset sales have fully satisfied the fund’s margin requirements.
The total size of Situational Awareness’s losses and the amount of additional capital required have also not been publicly established.
Citadel Agrees to Acquire Publicly Traded Assets
As the fund sought to reduce its exposure, Citadel reportedly reached a deal to purchase its publicly traded assets.
The transaction would effectively transfer a significant portion of Situational Awareness’s liquid portfolio while allowing the fund and its prime brokers to unwind positions more systematically.
The situation remains fluid, and details surrounding the transaction have not been fully disclosed.
Reports also suggested that Situational Awareness had explored selling a stake in AI company Anthropic. However, a spokesperson for the fund disputed claims that the Anthropic position was being marketed for sale.
A Major Test of Aschenbrenner’s AI Investment Thesis
The turmoil represents a significant test for the investment strategy that rapidly propelled Aschenbrenner into prominence.
After leaving OpenAI in 2024, Aschenbrenner published a series of widely discussed essays arguing that rapid improvements in artificial intelligence would create extraordinary demand for computing resources.
His thesis anticipated massive investment across GPUs, advanced memory, semiconductor manufacturing, data centers and power infrastructure as companies raced to develop increasingly capable AI systems.
Situational Awareness was subsequently built around investments designed to benefit from that expansion.
The recent losses do not necessarily invalidate the long-term thesis, but they demonstrate the risks associated with concentrated exposure to a theme whose underlying stocks can experience extreme volatility.
From OpenAI Researcher to High-Profile AI Investor
Aschenbrenner’s rise in AI investing followed an unusually rapid career trajectory.
He graduated from Columbia University as valedictorian at 19 before joining OpenAI’s Superalignment team.
He left OpenAI in 2024 following a dispute surrounding the disclosure of internal information. OpenAI said he had improperly shared internal material, while Aschenbrenner disputed that characterization and argued that the document involved was largely nonconfidential. The two sides have also presented different accounts of whether concerns he raised about security practices were connected to his departure.
After leaving the company, Aschenbrenner launched Situational Awareness and quickly attracted significant attention because of the fund’s performance and aggressive conviction around AI infrastructure.
AI Trade Faces a High-Stakes Stress Test
Situational Awareness’s difficulties illustrate the risks that can emerge when concentrated thematic investments, short positions and leverage collide with rapid market reversals.
AI infrastructure remains one of the dominant investment themes in global markets, but the fund’s experience shows that even a powerful long-term technology thesis can face severe short-term financial pressure when valuations and market positioning move sharply.
With its public equity portfolio now being unwound, attention will turn to the scale of the fund’s remaining private investments, its ability to meet outstanding obligations and whether Situational Awareness can restructure its portfolio while preserving its broader AI investment strategy.
