25-year-old hedge fund manager who lost $35 billion in a month eyes fresh capital after AI stock selloff

Two weeks ago, Leopold Aschenbrenner watched roughly $35 billion of investors' money disappear within days. His AI hedge fund, Situational Awareness, fell from a peak of $45 billion in early July to around $10 billion by late July after a massive crash in AI-focused stocks driven by leveraged bets through margin calls.

Despite the sharp decline, unnerved Aschenbrenner approached existing investors and lenders to raise fresh capital. The report said some investors have also been offered the opportunity to purchase assets directly from the fund's portfolio, though one person familiar with the discussions described the process as "ad-hoc" rather than a formal fundraising effort, the Financial Times reported.

Who is Leopold Aschenbrenner?

Born in Germany, Aschenbrenner graduated as Columbia's valedictorian in 2021 at the age of 19 and later joined OpenAI's Superalignment team. He was fired in April 2024 over an alleged information leak, which he disputes.


The minimum reported investment in his fund was $25 million. Its backers included Stripe founders Patrick and John Collison, former GitHub CEO Nat Friedman, investor Daniel Gross, as well as JPMorgan, Goldman Sachs and Bank of America.

How did the $35 billion wipeout unravel?

The fund's problems emerged in late July as AI-linked stocks suffered a sharp selloff. Situational Awareness had leverage of as much as 400% on a concentrated portfolio that included long positions in Nebius Group, SanDisk, CoreWeave and South Korea-listed SK Hynix. It also held short positions including Adobe, which moved against the fund.

Nebius fell 17.98% between July 1 and August 7. As lenders demanded additional collateral, Aschenbrenner sold most of his public-equity portfolio to Ken Griffin's Citadel at roughly a 10% discount. The losses involved leveraged bets on public equities, and there have been no allegations of fraud or misappropriation.

Aschenbrenner retained his private holdings, including Anthropic, last valued near $965 billion, compute provider Fluidstack and AI-chip startup MatX.

Still willing to pour money?

More than 5,000 investors were also reportedly still copying his trades through retail platforms, a news report by Business Insider said.

On August 4, the fund committed another $400 million to Source Foundry, following a $100 million investment in the same company the previous month. The combined $500 million deployment was presented as a sign of Aschenbrenner's continued confidence.

Lesson learnt

In a letter to investors, he said the fund had taken the steps needed to "fight another day" and that it needed to be structured so it could absorb losses and continue operating. He also said he would make it his mission to learn the necessary lessons from the experience.

The response in Silicon Valley has been markedly different from the reaction that might be expected on Wall Street. Logan Bartlett of Redpoint Ventures described the mood by saying there is an "archetype of a hero" and that a movement is rallying around Aschenbrenner. Silicon Valley places a premium on being right about the direction of technology and can view a leveraged loss as a learning experience.

Wall Street, by contrast, focuses on returns while also protecting capital. Aschenbrenner is therefore attracting backing based on conviction despite having a limited track record.

Aschenbrenner had no previous experience managing institutional money before putting together one of the largest AI-focused funds.

The fund's use of as much as 400% leverage on a concentrated portfolio of volatile AI infrastructure stocks, alongside illiquid private investments that cannot be sold to meet margin calls, created a structural mismatch.

Retail investors who copied the fund's positions were exposed to the losses but did not have access to the potential upside from its private holdings.

The next key development will be whether Situational Awareness reopens to outside investors in the next quarter.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)