Leopold Aschenbrenner, who was widely regarded by the market as an artificial intelligence prodigy, has suffered a major setback. His AI-focused investment fund, Situational Awareness, reportedly recorded a loss of as much as 67 percent in July. Following margin calls, most of the fund’s publicly listed equity holdings were reportedly liquidated and sold to hedge fund firm Citadel, founded by Ken Griffin.
Whenever a market crash occurs, a number of so-called “market geniuses” tend to emerge. Many of these figures are relatively young investors who achieve extraordinary short-term returns by taking aggressive risks at the later stages of a market bubble. However, such impressive gains are often built on excessive leverage and concentrated bets. Historically, many of these “investment prodigies” fail to survive more than three years in the market, as the returns generated during the final stages of a bubble are frequently wiped out within months when the bubble eventually bursts. As a result, the myth surrounding these young “market legends” often collapses along with the market downturn, and their names gradually disappear from investors’ memories.
In reality, Aschenbrenner was able to establish Situational Awareness largely because of his previous role as a researcher at OpenAI. After leaving OpenAI in 2024 following disagreements with the company’s management, he published Situational Awareness: The Decade Ahead, a more than 100-page essay that drew significant attention and established his reputation in the AI investment community. Despite having no prior experience managing external capital, he launched his fund in 2025 and used financing from banks and other institutions to build leveraged positions in such firms as SanDisk, SK Hynix, and CoreWeave. However, their stocks’ sharp declines in July forced the fund to sell a substantial portion of its holdings to repay outstanding borrowings.
Situational Awareness has not been liquidated. In a letter to investors, Aschenbrenner said he had invested all of his own capital into the fund. He also noted that while the fund suffered a 67 percent loss in July, it still maintained a net gain of approximately 80 percent year-to-date. He said the fund would arrange a conference call with investors to discuss future strategy and next steps.
Nonetheless, after this episode, it will likely be much more difficult for the fund to regain its previous momentum. Many financial institutions may become more cautious about extending it significant leverage or credit facilities. In this regard, Aschenbrenner was arguably fortunate, as he avoided the fate of a South Korean YouTuber who reportedly suffered severe physical injuries after recommending that investors buy SK Hynix shortly before the stock experienced a significant decline.
Ultimately, true investment legends are not created by market bubbles; they are proven through time and resilience. The recent performance of Warren Buffett’s Berkshire Hathaway, whose share price reached an eight-month high despite broader market volatility, serves as a reminder that the 95-year-old investor remains a genuine market icon precisely because his track record has endured through multiple cycles.
Andrew Wong is a veteran independent commentator
