Wall Street doesn't believe in tears, only in chips.
In the last week of July 2026, a Gen Z individual once again proved this truth at a cost of tens of billions of dollars.
The protagonist of the story is Leopold Aschenbrenner. If you follow the AI community, you may have heard this name—he graduated first in his class from Columbia University at age 19 and then joined OpenAI as a researcher.
In 2024, he was fired by the company for "leaking internal information" after disagreeing with OpenAI's management over an internal security memo—he claimed he was dismissed for speaking out about safety flaws. Two months later, he published a 165-page paper titled "Situational Awareness", which caused a sensation in Silicon Valley by predicting the imminent arrival of superintelligence.
At the same time, he founded a hedge fund named Situational Awareness.（Further reading:At 24, $20 Billion, Jane Street’s Rare Entry—He Became the Most Radical Fund Manager in AI）
This fund grew to over $20 billion in less than two years, peaking at $45 billion in early July this year, with a return rate of 439% in the first half of the year, earning him instant fame on Wall Street.
His strategy is clear: use 4x leverage to go long on AI infrastructure—including a basket of AI hardware stocks like Nebius and CoreWeave—while shorting traditional software stocks. During the previous surge, this was essentially a money printer.
But when the printing press reverses, it becomes a meat grinder.
In July, AI stocks suddenly turned sour. The stocks he heavily weighted, such as Nebius and Sandisk, plummeted sharply, while his holdings in SK Hynix and Micron also suffered heavy losses. Meanwhile, software stocks he had shorted, like Adobe, surged violently by 36%. Caught in a pincer movement, the impact of 4x leverage began to show, and losses spiraled out of control like an avalanche.
Margin calls from prime brokers have begun coming in. According to Reuters, Goldman Sachs, JPMorgan Chase, Bank of America, and Citigroup—these top investment banks are Situational Awareness’s prime brokers—and they have started demanding additional margin. The New York Times revealed more urgent details: Over the past 36 hours, Aschenbrenner has urgently reached out to competitors in an attempt to sell over $10 billion in stocks to support the portfolio.
But time was not on his side. In the end, he had only one choice left: to sell his leveraged public stock positions.
The news spread, and half of Wall Street smelled blood—the fund held nothing but high-quality AI assets and was selling them at the height of panic.
Buyers lined up to bid. Millennium arrived, and Jane Street came too—still an early investor in Situational. But the ultimate winner was: Ken Griffin’s Citadel.
Citadel plays an exceptionally unique and pivotal role in the U.S. stock market and global capital markets. It is one of the world’s largest and most profitable multi-strategy hedge funds, as well as the largest independent market maker, handling approximately 40% of retail stock trading volume and nearly 25% of total U.S. stock trading volume.
At 57, Ken Griffin started his journey in a Harvard dorm room in 1990 and now manages $71 billion in assets. In 2022, he earned $16 billion, breaking the single-year profit record held by Soros for 30 years. His greatest strength lies in elegantly stepping in when others are struggling, picking up the chips left on the table.
Neither party has disclosed the details of the transaction.
But the results are clear: Situational Awareness’s assets have plummeted to around $10 billion, and it is currently negotiating the sale of its stake in Anthropic. Notably, Aschenbrenner’s fiancée works at Anthropic. According to CNBC citing sources, the two are set to get married this weekend—a timeline so cruel it borders on black humor.
Those public market positions are said to have been handed over at a "significant discount." Community rumors suggest that Citadel acquired these assets at a rate of 40 to 50 cents per dollar—a figure unverified by official sources, but even as rumor, it underscores the coldness of this transaction.
The story is already tragic enough.
But when connecting the recent events in chronological order, some veteran players feel that things are not that simple.
The first event occurred in late June. At the time, the SOX Index (Philadelphia Semiconductor Index) was still at elevated levels, and Scott Rubner, a strategist at Citadel Securities, stated that July had strong liquidity support and that seasonal trends looked favorable. His analysis has always been closely watched by the market. Rubner specifically highlighted strong retail investor funding—throughout the entire month of July, there was “not a single day” with net selling on Citadel’s retail cash equity trading platform.
The second thing happened just days before the FOMC meeting. Frank Flight, Head of Macro Strategy at Citadel Securities, released a report stating that the likelihood of the Fed unexpectedly raising rates at its July meeting was around 40%—a view nearly unique among major institutions. On that day, market sentiment had already begun to turn panicked, with increased selling pressure on AI stocks.
The third thing is the FOMC minutes released on Wednesday, July 29. The Federal Reserve ultimately voted 9 to 3 to hold rates steady; within an hour after the press conference, the 30-year Treasury yield and the VIX volatility index surged, triggering a sharp market sell-off.
Fourth, just before the market opened the next day, Citadel officially stepped in and acquired the positions of Situational Awareness that were about to be liquidated—possibly along with other unknown funds in similar situations.
Then, after the U.S. stock market opened on Thursday, the Nasdaq 100 Index surged 6.7% for the day, marking its largest gain in months.
The timeline is clear: in June, it was said there would be a market move in July → fears were stoked before the FOMC with talk of "possible rate hikes" → the market crashed after the press conference → liquidations occurred → Citadel stepped in before market open → the market surged after opening.
Coincidence? Or a carefully planned hunt?
However, Citadel Securities' publication of macroeconomic research reports is part of its regular business operations. The report itself makes no mention of Situational Awareness or any AI individual stocks. Connecting these separate elements into a "conspiracy theory" currently lacks direct evidence.
For ordinary retail investors, this story offers several simple lessons:
Leverage is a double-edged sword. A 100% gain can be wiped out by a 50% drop. With 4x leverage, a 25% move against you can wipe you out entirely. If you're trading stocks on margin or borrowing to trade crypto, think carefully about that "what if."
Crowded places are prone to stampedes. In the first half of the year, everyone was talking about AI chips, just like everyone was talking about the internet back then. When everyone rushes into a trade, danger is already on its way.
Never let yourself become the person who is forced to sell. Once you're forced to sell, the price is no longer in your control. Aschenbrenner’s biggest mistake wasn’t misjudging AI—it was losing his options at the worst possible time.
At 25, Aschenbrenner is still young and has a chance to bounce back. But the lesson came at a cost of tens of billions of dollars.
And Ken Griffin, once again, fortified his castle on the ruins of others.
Author: bootly
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