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Leopold Aschenbrenner can’t catch a break. Less than two months after Situational Awareness suffered what’s been called one of the largest dollar losses in hedge fund history, his fund is back in the red — this time on a fresh batch of AI stock options that turned sour almost immediately.
The trades in question were placed between September 2 and 10. Situational Awareness bought options tied to AMD, Bloom Energy, CoreWeave, SK Hynix, SanDisk, and the Roundhill Memory ETF. By Monday, the stocks connected to those positions had dropped somewhere between 5% and 8%. The sell-off wasn’t random. It came after Anthropic CEO Dario Amodei published an essay predicting an imminent AI takeover of the internet — a piece that went viral fast. Elon Musk and Sam Altman both backed Amodei’s claims publicly, and markets reacted hard. AI-adjacent names got hit across the board, and Situational Awareness was sitting in the middle of it.
Not great timing.
From $225 Million to $45 Billion — Then the Floor Fell Out
Aschenbrenner launched Situational Awareness in 2024 with $225 million. The fund’s pitch was pretty straightforward: go long on AI stocks with heavy leverage — up to 400% — and ride the wave. It worked, for a while. By July of this year, assets had grown to over $45 billion. That’s a staggering run. The fund attracted backing from serious names: Stripe co-founders Patrick and John Collison, former GitHub CEO Nat Friedman, and investor Daniel Gross all came in.
Then July happened. AI stocks dropped sharply, and the leverage that had powered the fund’s rise turned into a wrecking ball. Margin calls hit. Forced sales followed. Assets collapsed to around $10 billion. Citadel stepped in and bought a significant chunk of the remaining portfolio — at a discount. JPMorgan Chase, which had been providing leverage financing, pulled out. Aschenbrenner moved his prime brokerage relationship to Clear Street. The whole episode drew widespread scrutiny and landed in the record books for the wrong reasons.
It’s hard to overstate how fast things unraveled.
Flex Options and the New Risk Playbook
After the July collapse, Situational Awareness shifted strategy. Out went the high-leverage approach. In came “flex options” — fully paid contracts where the maximum loss is capped at the premium paid. No margin calls. No forced liquidations. The idea was to stay exposed to AI upside without the catastrophic downside risk that wiped out so much of the fund earlier this year.
On paper, it’s a more conservative posture. And in a stable or rising market, flex options make sense for a fund trying to rebuild credibility with investors. But the September trades landed right into a market sell-off driven by macro sentiment around AI’s trajectory. Even a capped-loss structure still loses money when the underlying moves against you, and that’s basically what happened here.
Whether the timing was just bad luck or a sign of something deeper in the fund’s market reads — unclear. Aschenbrenner hasn’t said publicly. No detailed comment from the fund on the September losses has surfaced.
The move to Clear Street as prime broker is probably the most telling structural change. JPMorgan cutting off leverage financing wasn’t a small thing — it was a signal about how the street viewed the fund’s risk profile after July. Clear Street is a legitimate prime brokerage operation, but the shift away from JPMorgan still carries reputational weight in the hedge fund world. Rebuilding that kind of institutional trust takes time, and fresh losses don’t help.
What’s interesting is that Aschenbrenner hasn’t walked away from the AI thesis. He’s still putting money to work in AMD, in CoreWeave, in memory-adjacent plays like SanDisk and SK Hynix. The fund’s identity is tied to the bet that AI infrastructure spending keeps growing — that the picks-and-shovels names in semiconductors and data center power will win regardless of which AI model ends up dominating. Bloom Energy fits that logic too, given its role in powering data centers.
That thesis isn’t crazy. It’s probably right over a multi-year horizon. But AI stocks can be brutal in the short run, especially when a single viral essay from a well-known CEO can move the whole sector by 5% to 8% in days.
The Collisons, Friedman, and Gross were betting on Aschenbrenner’s conviction when they came in early. Whether they’re still comfortable with the fund’s trajectory after two significant drawdown events in the same year — that’s not something the public record answers right now. No investor statements. No updated commitments. Just the trades, and the losses that followed.
Situational Awareness bought those options between September 2 and 10. By Monday, the damage was done.
Frequently Asked Questions
What stocks did Situational Awareness buy options on in September?
The fund bought options tied to AMD, Bloom Energy, CoreWeave, SK Hynix, SanDisk, and the Roundhill Memory ETF between September 2 and 10.
Who backed Leopold Aschenbrenner’s hedge fund at launch?
Notable backers included Stripe co-founders Patrick and John Collison, former GitHub CEO Nat Friedman, and investor Daniel Gross. The fund launched in 2024 with $225 million.
Why It Matters
The continued losses for Situational Awareness Fund highlight the volatility inherent in the AI and tech sectors, particularly as investor sentiment shifts in response to market dynamics and economic indicators. This situation underscores the challenges hedge funds face when navigating complex derivatives tied to rapidly evolving technologies, further emphasizing the need for robust risk management strategies in an increasingly unpredictable market environment. As the broader market reacts to such high-profile fund struggles, it could influence investor confidence and trading behavior across the technology sector.
