Young AI hedge fund founder loses $35 billion on bet that AGI arrives by 2027

A hedge fund launched by a 24-year-old former OpenAI researcher has suffered one of the fastest financial collapses in recent memory. Situational Awareness, which began July worth roughly $45 billion, saw its assets plummet to $10 billion after a severe downturn in AI stocks forced the firm to liquidate most of its public holdings to billionaire investor Ken Griffin's Citadel.

The scale of the disaster is staggering. The fund lost an estimated $35 billion—more than three times the previous record for trading losses, which was set by Archegos Capital Management in 2021. The whole operation employed just eight people, only four of whom were investment professionals.

How a first-time fund bet the farm on AI#

Situational Awareness was founded by Leopold Aschenbrenner, a Columbia University valedictorian who spent roughly a year at OpenAI's superalignment team before launching his hedge fund. The fund's entire investment thesis rested on a series of essays Aschenbrenner published claiming that superintelligence would arrive by 2027, making AI stocks an obvious moneymaking opportunity.

The fund's initial holdings told the story of its concentration: Nebius Group, SanDisk, Micron, and CoreWeave. Each of these stocks fell more than 35 percent in a single month, according to CNBC.

The leverage trap#

Like many aggressive hedge funds, Situational Awareness didn't just invest its own capital—it borrowed heavily to amplify bets. This strategy works beautifully in bull markets, and Aschenbrenner even claimed the fund was up 439 percent at one point. But when AI stocks reversed course, the same leverage that magnified gains turned catastrophic. Margin calls from lenders forced the fund to rapidly sell assets, a fire sale that accelerated losses.

Aschenbrenner had acknowledged the risk in previous interviews, noting that his fund's strategy depended on precise timing: "You have to get the timing right. The sequence of bets on the way to AGI is actually pretty critical." That timing, it turned out, was off.

Why serious investors backed an unproven fund manager#

Situational Awareness attracted backers including Patrick and John Collison of Stripe, Meta AI researchers Daniel Gross and Nat Freedman, and trading firm Jane Street. Many cited Aschenbrenner's social credibility: he'd been called an "economics prodigy" at 17 by libertarian economist Tyler Cowen, worked at the now-defunct FTX Future Fund, and earned Columbia's valedictorian honors at 19.