AI Stock Market Guru's Waterloo: Forced to Liquidate Holdings to Citadel After Fund Plunges 67% in a Single Month

July 31st, according to The Wall Street Journal, the hedge fund Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, suffered a significant loss during the AI stock market plunge in July, with a monthly net asset value decline of approximately 67%.

The report stated that the fund had previously heavily bet on AI-related stocks. As related positions experienced a sharp retreat, the fund was forced to sell most of its stock holdings to raise cash to meet margin calls from loan institutions. A considerable portion of the holdings were taken over by Citadel, led by Ken Griffin.

In a letter to investors, Aschenbrenner said, "This month we have disappointed you." He attributed some of the losses to exacerbated short selling and described the fund facing pressure similar to a "run on the bank." Nevertheless, Situational Awareness had seen a significant surge before, with gains of up to 270% by the end of May. Despite the sharp drop in July, the fund was still up by around 80% year-to-date.

The report also mentioned that Situational Awareness, established about two years ago, had at one point managed assets of over $20 billion. Aschenbrenner had no prior professional investment experience, but based on his research and influence in the AI field, some investors saw him as a key figure in AI investments. The fund still holds investments in private AI companies, including Anthropic.