Hedge fund loses $13b on AI bets — and its founder was planning his wedding

A hedge fund that concentrated its bets on AI stocks lost 67 percent of its value last month and sold off most of its holdings.

Hedge fund Situational Awareness lost $13 billion against a fund size of $20 billion after investing with 400 percent leverage, according to the Wall Street Journal, the New York Post and other outlets. The fund's portfolio, which had once swelled to $45 billion, shrank to $10 billion after the losses and asset sales.

As losses mounted, founder Leopold Aschenbrenner reached out to major global hedge funds for financial support and transferred billions of dollars in holdings to Citadel, the New York Post reported. In a letter to investors, he said he had sold part of the fund's public equity portfolio and pledged to "secure a higher level of resilience going forward."

A veteran Wall Street investor who asked not to be named called Aschenbrenner "a 25-year-old who became a paper billionaire thanks to a bubble," adding, "Everyone thinks they can start a fund, but they forget how hard it is to be a good fiduciary."

Aschenbrenner graduated from Columbia University at 19 and went on to work at FTX under Sam Bankman-Fried. He joined OpenAI in 2023 as part of a team overseeing superintelligence and was let go roughly a year later. He reportedly found himself in the middle of the crisis while preparing for his wedding.

When he launched the fund, Aschenbrenner published a 165-page essay titled "Situational Awareness: The Decade Ahead," earning him the nickname "the Nostradamus of AI." Ivanka Trump praised the work, and despite having no investment track record, Aschenbrenner attracted backing from major investors.

The New York Post compared the episode to the dot-com crash of 2000 and the 2008 financial crisis, noting that whenever a new technology emerges, expectations build that every company in its ecosystem will transform the world and generate strong returns — but in reality, only a handful ever do.

An investment officer at a large pension fund told the New York Post that "very few AI companies are generating cash returns in the near term." Many AI tools are either free or priced low to attract users, the official said.

The official warned that "an industry shakeout is imminent," calling Situational Awareness "the canary in the coal mine."