A sudden crash in AI tech stocks caused this legendary fund, which had surged from $200 million to $45 billion, to vanish in just one month.

Article author and source: AI New Era

Today, the entire internet has been flooded with the story of this 25-year-old "AI prophet."

Just now, Wall Street witnessed a textbook-style liquidation.

The main characters in this turbulent market are Leopold Aschenbrenner, hailed by Silicon Valley as an "AI prophet," and his hedge fund, Situational Awareness, which achieved a staggering 439% return.

Because he accurately rode the AI wave, he was once hailed as a visionary and led a vast empire managing over $20 billion.

But a sudden crash in AI tech stocks caused this legendary fund, which had surged from $200 million to $45 billion, to vanish in just one month.

Why did a $45 billion empire collapse overnight?

The reason is that the AI hardware stocks in which "The Prophet" held heavy long positions—SK Hynix, Micron, CoreWeave, etc.—plummeted more than 35% this month, while the software stocks he shorted, such as Adobe, rebounded contrary to the trend.

Ironically, the very next day after being forced to liquidate, the AI stocks he heavily invested in surged sharply in rebound—

He died on the eve of the big rebound in AI stocks.

And the most tragic victims of this event were South Korean investors thousands of miles away—who bet everything on their faith in AI, only to fall into a abyss.

It’s tragic that this “prophet,” who correctly predicted the trend, died just five minutes before dawn—and took half the world’s investors down with him.

AI "prodigy" forms the most impressive couple in Silicon Valley with his fiancée

The male protagonist of this "epic liquidation," Leopold Aschenbrenner, lived a legendary life over the first 25 years of his life.

He is a member of Generation Z, of German descent, enrolled at Columbia University at age 15, and graduated at age 19 with the highest ranking in his class.

Post-graduation, his path became a classic rags-to-riches storyline: he first joined SBF’s FTX Charity Fund, then seamlessly transitioned into OpenAI, joining Ilya’s personally led “Superalignment Team”—the core within OpenAI’s core.

But what really captivated Silicon Valley’s gossip circles was his partnership with his fiancée, Avital Balwit, dubbed the “AI Power Couple.”

This lady is also an impressive individual: she’s a Rhodes Scholar, graduated from Oxford’s FHI, and now serves as Chief of Staff to the CEO of Anthropic.

This duo is as formidable as Mr. and Mrs. Smith: one worked at OpenAI, the other held a senior position at Anthropic—over dinner, a casual conversation could exchange the industry’s most sensitive AI secrets.

Later, Leopold was fired by OpenAI for "whistleblowing," and in a fit of anger, he wrote a 165-page "Bible of AI," which immediately sent shockwaves through Silicon Valley.

In June 2024, Leopold Aschenbrenner published a lengthy article, extrapolating from the trend of computing power and data doubling tenfold in successive cycles, all the way to the emergence of AGI and intelligent agents in 2027, triggering an "intelligence explosion" and a trillion-dollar cluster race.

This long-form article, "Situational Awareness: The Next Decade," predicts that AGI will disrupt the world by 2027. The article went viral in Silicon Valley, and he subsequently entered the financial world, armed with his "AI Bible," storming Wall Street.

Earned 439% in six months, nearly achieved godlike status with a $20 billion empire

Next, this young man with no professional investment experience founded the hedge fund Situational Awareness LP.

This name is so Versailles.

The early investor lineup rivals Silicon Valley’s all-stars: Stripe co-founders the Collison brothers, Meta AI head Daniel Gross, quantitative giant Jane Street—all invested.

The fund started at the end of 2024 with approximately $2.25 billion and grew to over $20 billion by mid-2026, peaking close to $45 billion.

Their performance is astonishing: eight people managed $45 billion and achieved a staggering 439% return in just six months—numbers so impressive that even Warren Buffett might consider switching careers.

Situational Awareness LP’s Early Holdings: Chips, Power, and Data Centers—All Pure AI Infrastructure “Shovel Sellers” (Source: Fortune)

The fund's strategy is straightforward and aggressive: load up on leverage across the AI supply chain and make heavy bets.

He not only held large positions in SK Hynix, SanDisk, and Nebius Group, but also made significant investments in Anthropic, the company where his fiancée works, in the private market.

In the first half of 2026, AI continued its surge, and Leopold’s strategy emerged as a resounding success.

At the end of July, Leopold wrote to investors, saying something along the lines of: “Those of you who didn’t add more funds earlier—now you’re regretting it, right? No worries, you can still deposit now.”

This letter was later dubbed the "death flag" by the market.

Death Is Coming: South Korean Retail Investor Stampede

By July, AI stocks suddenly turned sour. The market began to worry: these tech companies were spending too much money—where were the returns? A selling spree began.

The first avalanche began in South Korea.

South Korean retail investors are famously known as "borrow-and-trade maniacs." When AI-related stocks dropped, it immediately triggered margin calls from brokers: deposit more funds quickly, or face forced liquidation; if you can’t deposit, your positions will be sold off.

South Korean investors were forced into frantic selling, causing further price declines and triggering margin calls for more investors... this death spiral pulled in global assets tagged with "AI."

And Leopold’s fund sits right at the center of the spiral.

If you simply buy and hold, the loss is only on paper.

But Leopold made Wall Street’s most fatal mistake—overleveraging.

In favorable market conditions, he leveraged funds from Goldman Sachs and JPMorgan to amplify his positions, creating a 439% miracle; but in adverse conditions, the leverage turned against him and destroyed everything.

The AI stocks heavily weighted by Situational Awareness LP peaked in June and collectively plunged by 50% in July, with most falling over 40%—directly triggering its forced liquidation and fund closure (Source: Bloomberg)

Wall Street bankers turned ruthless, issuing him a massive margin call.

Within less than 24 hours, Leopold desperately reached out to investors, trying to sell assets and secure new funding. But as the situation collapsed, everyone turned against him—his beliefs and his top-tier connections in Silicon Valley meant nothing at this moment.

Ultimately, traders were forced to sell under a harsh schedule, resulting in forced liquidations.

Not only did he himself get wiped out, but he also dragged down global AI-related stocks, causing countless retail investors to suffer losses alongside him.

“Face shredded”: Citadel swallows $16 billion in one bite

For top hedge funds, other people’s liquidations are their celebration.

Ken Griffin, founder of Citadel, is known as Wall Street's top "vulture." He excels at buying assets at deeply discounted prices when others are liquidated.

Under the arrangement of an investment bank, Citadel acquired approximately $16 billion in leveraged positions from Situational Awareness.

Leopold barely held on to the portion of client funds he had invested, plus approximately $5 billion in Anthropic private equity—his fiancée’s domain and his last remaining card.

The process of transferring these assets is enough to drive someone to despair.

Bloomberg originally wrote: “Traders call this getting ‘face ripped.’ This time, it was Ken Griffin doing the ripping. I absolutely did not want to take that handoff call. It was brutal.”

The 25-year-old genius, once idolized as a deity, had to bow his head and sell his beloved "gold assets" at a discount to Wall Street’s seasoned veterans.

Killing both body and spirit: You just got liquidated, and the bull market has returned.

If liquidation is merely the destruction of the physical, then what follows is nothing short of psychological torture.

Immediately after the announcement that Citadel had taken over, Leopold’s heavily weighted AI stocks surged sharply— the Nasdaq 100 index rose more than 3% in a single day.

Why?

Wall Street’s wolves have long been eyeing Leopold’s predicament. Everyone is shorting, waiting for him to be liquidated.

When the news broke that Citadel had taken over, it meant the largest source of forced selling in the market had finally disappeared.

Short sellers covered their positions, and longs launched a counterattack—the bull market is back.

You correctly identified an era and had top-tier industry connections, but you used leverage, and the market pushed you to the brink.

The market doesn't judge whether your ideas are right or wrong—it only judges whether you can survive.

Wall Street's century-old rule: Right on the trend, wrong on timing

Leopold Aschenbrenner's tragedy is not an isolated case.

The first example is Long-Term Capital Management (LTCM) in 1998, which had two Nobel laureates on its team and a mathematically flawless model.

As a result, Russia defaulted on its debt that year, triggering irrational market panic and leading to the direct liquidation of their highly leveraged positions.

The second example is Peter Thiel’s Clarium Capital.

The patriarch believed oil prices would rise, so he went all in. The short-term trend reversed, and leverage caused him massive losses. A correct logic does not equal a profitable trade.

Today, this Silicon Valley prodigy, who conspired with his fiancée to master AI, also made it onto this "List of Deaths for the Intelligent."

Finally, Leopold and his fiancée remain among the world’s most knowledgeable people about AI.

He still holds 5 billion in Anthropic equity; if AGI truly arrives, he could still make a comeback.

But this time, Wall Street taught him—and all AI enthusiasts—a lesson: being the smartest person in the room won’t prevent you from crashing and burning in the capital markets.

Sometimes, arrogance can accelerate your downfall.

Reference materials:

https://x.com/CharlesRollet1/status/2082924907344933072

https://www.businessinsider.com/leopold-aschenbrenner-situational-awareness-wall-street-lesson-ai-stocks-2026-7

https://www.wsj.com/finance/citadel-buys-situational-awarenesss-stock-portfolio-after-big-losses-in-ai-5117159b