The biggest winners in today's broad stock market rally share one thing in common: they were among the largest holdings of Situational Awareness, the hedge fund founded by Leopold Aschenbrenner.

Aschenbrenner became a recognizable name in financial circles after publishing "Situational Awareness: The Decade Ahead" in mid-2024, a widely circulated essay arguing that artificial general intelligence could arrive as soon as 2027–2028 and that the United States must prepare for an ensuing intelligence explosion. A former OpenAI researcher with deep connections in the AI community, he leveraged that profile to launch a hedge fund bearing the essay's name. The fund delivered extraordinary returns — reportedly exceeding 1,000% last year and 300% as recently as a month ago — fueled by highly leveraged bets on companies across the AI infrastructure stack: chipmakers like AMD, memory leaders like SK Hynix, and the power and cloud-compute providers supplying the physical backbone of AI deployment.

However, leverage cuts both ways. After growing to approximately $45 billion in assets, the fund appears to have unraveled this week.

According to CNBC, the fund reached $45 billion at the start of July before suffering one of the most dramatic declines in hedge fund history. The Wall Street Journal reports that Situational Awareness sold the bulk of its public stock portfolio to Ken Griffin's Citadel in what amounted to a fire sale.

Rumors of margin calls and financial distress had circulated, but were difficult to believe given the fund's size. Those rumors proved accurate. When prime brokers issue margin calls on leveraged positions and collateral cannot be posted, the resulting forced liquidation can cascade rapidly — a dynamic familiar from the 2021 collapse of Archegos Capital Management. Forced selling put heavy downward pressure on several of the fund's top holdings, including SanDisk, which saw its share price collapse during the liquidation.

Once the market recognized that a forced seller — rather than fundamental weakness — was driving prices lower, buyers rushed back into the battered names. Several of the fund's major holdings posted sharp rebounds:

• Bloom Energy: +26.5%
• Nebius Group: +27.1%
• CoreWeave: +21.5%
• Core Scientific: +20.4%
• AMD: +13.0%

The speed of the rebound underscores that the selloff was driven by liquidity mechanics rather than company-specific news. Another significant holding, SK Hynix, will be closely watched in South Korean trading. The fund's leveraged positions affected not only U.S. technology stocks but also roiled the South Korean market, leaving a trail of margin-called traders in their wake.

To contextualize the scale of the fund's collapse, Citadel manages approximately $71 billion, Bridgewater Associates manages $78 billion, and Elliott Management manages $76 billion. By comparison, Archegos Capital Management had roughly $20 billion plus an estimated $10 billion in bank losses, while Long-Term Capital Management (LTCM) had $4.8 billion in capital but $125 billion on its balance sheet.

Reporting indicates that Aschenbrenner was not entirely wiped out. The fund reportedly sold the bulk — or nearly all — of its public portfolio to Citadel. The final outcome will depend on the price Citadel paid. Citadel likely acquired the assets at a discount to the previous day's closing prices and is already reported to be sitting on substantial gains. The public portfolio was reportedly valued at approximately $16 billion, an amount that could not have been liquidated in the open market without causing severe additional price declines.

In effect, Citadel played a stabilizing role reminiscent of J.P. Morgan's interventions during past financial crises, absorbing the positions and helping to restore market order. The episode also echoes questions about risk-management practices at prime brokers and the systemic risks posed by large, concentrated, leveraged funds — questions that surfaced after Archegos.

Situational Awareness also holds a reported $5 billion private stake in Anthropic, among other investments, meaning the situation was likely not a total collapse. However, even a 50% reduction in the fund's value would place it among the largest hedge fund losses in history, alongside Archegos.