Leopold Aschenbrenner, a 24-year-old investor, saw his AI-focused hedge fund, Situational Awareness, experience a dramatic reversal of fortunes. Having launched in June 2024 with concentrated bets on artificial intelligence companies, particularly those involved in “picks and shovels” infrastructure, the fund surged over 1000 per cent, accumulating approximately $US20 billion in funds under management by late June. Situational Awareness made significant investments in firms like memory giant SanDisk, AI infrastructure players Nebius and Core Scientific, data centre power group Bloom Energy, and neocloud operators CoreWeave, SharonAI, and Iren.
The meteoric rise, however, was short-lived. A shift in market sentiment, fuelled by growing scepticism about AI demand amid patchy evidence of productivity gains and rising AI token costs, began to weigh on the sector. This was compounded by the emergence of a new Chinese AI model, Kimi K3, raising questions about the US ecosystem’s future, and a deep bear market in Korean technology stocks. Meta Platforms’ June quarter results, which missed expectations and failed to demonstrate returns on AI spending, further intensified concerns. High leverage within Situational Awareness magnified the downturn, with major holdings like SanDisk, CoreWeave, and Iren plummeting over 50 per cent in a month.
Amidst a scramble to raise fresh capital, Situational Awareness ultimately saw its $US16 billion public equity portfolio acquired by hedge fund giant Citadel. While Aschenbrenner reportedly retained private investments, including a $US5 billion stake in Anthropic, his fund’s spectacular run concluded rapidly. The market, however, saw a rebound in AI stocks shortly after, partly attributed to relief rallies post-acquisition fears, and strong results from Microsoft which restored some faith in AI investment returns. The swift rise and fall underscore critical lessons regarding the risks inherent in high leverage and concentrated investments within volatile, rapidly evolving sectors like artificial intelligence.
