Huo Xing Cai Jing reports that on July 31, according to The Wall Street Journal, citing sources familiar with the matter, the hedge fund Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, suffered significant losses in July amid a sharp decline in AI-related stocks, with its net asset value dropping approximately 67% for the month. The report states that the fund had heavily concentrated its positions in AI-linked equities. As these holdings experienced substantial drawdowns, the fund was forced to sell most of its stock positions to raise cash and meet margin calls from lenders. A significant portion of these positions was acquired by Citadel, led by Ken Griffin. In a letter to investors, Aschenbrenner stated, “This month, we let you down.” He attributed part of the losses to increased short-selling pressure and described the fund as facing a situation akin to a “bank run.” Despite this, Situational Awareness had previously delivered extraordinary gains, with its year-to-date return reaching 270% as of the end of May; even after July’s steep decline, the fund remains up approximately 80% for the year. The report also notes that since its founding about two years ago, Situational Awareness’s assets under management once exceeded $20 billion. Although Aschenbrenner had no prior professional investment experience, his research and influence in the AI field led some investors to view him as a leading figure in AI investing. The fund continues to hold investments in private AI companies, including Anthropic.
AI-focused hedge fund experiences 67% monthly loss, sells holdings to Citadel
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Summary
Situational Awareness, an AI-focused hedge fund with a poor risk-to-reward ratio, lost 67% of its net asset value in July 2026. Following heavy losses in AI stocks, the fund sold most of its holdings to Citadel. Leopold Aschenbrenner attributed the decline to short selling and liquidity pressure. Despite the drop, the fund still achieved an 80% gain year-to-date. Value investing in crypto remains a key strategy for long-term stability.
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