Ex-OpenAI researcher Aschenbrenner's AI hedge fund plunges 67% in July

Eric Esposito Mon, August 3, 2026 at 9:30 AM PDT · 4 min read

Leopold Aschenbrenner, 25, was once hailed as the great German genius of AI trading.

According to the Financial Times, the former OpenAI researcher delivered gains of 1,551% since opening his hedge fund, Situational Awareness, in 2024. Within the first six months of 2026, the fund was already up a staggering 439%.

At its peak, Situational Awareness held $45 billion in assets, mostly in companies tied to the AI data center buildout, as reported by CNBC. Prominent tech figures — including GitHub CEO Nat Friedman and Stripe co-founders Patrick and John Collison — helped support Aschenbrenner's growing empire.

But despite making strong picks during the AI bull run, Aschenbrenner was caught off guard by a sharp market correction. Not only did the companies he held take a nosedive, but he also suffered heavy losses on short positions in legacy software names like Adobe.

That alone would have been disappointing — but not necessarily devastating — had it not been for one factor: borrowed money.

A report from MarketWatch suggested that some of Aschenbrenner's positions carried as much as four times leverage, meaning prices moved up or down four times the asset's market value. When semiconductor stocks soared, Situational Awareness was effectively printing billions in gains. However, once volatility returned to these high-flying names, margin calls from brokers flooded in, pushing Aschenbrenner to the brink of liquidation.

According to The New York Times, Aschenbrenner frantically contacted Wall Street firms to raise cash. On July 30, Situational Awareness narrowly avoided collapse by striking a deal to sell $10 billion worth of its public stock to market maker Citadel.

In a letter to investors obtained by the Financial Times, these events led to a 67% decline in Situational Awareness's portfolio for July.

Aschenbrenner took "full responsibility" for the losses, telling investors:

"These were very expensive scars, but I am dedicated to ensuring they will be invaluable lessons for our organization and for myself as we move forward."

MoneyWise reached out to Situational Awareness for comment but did not receive a response by the time of publication.

Margin Trading Mania in the AI Era

Silicon Valley hedge funds are not the only ones borrowing heavily to speculate on AI stocks. Recent data suggests retail traders have also been increasingly using leverage to amplify their AI-related positions.

A report from Reuters highlighted just how pervasive leveraged trading has become in South Korea, as local chipmakers Samsung and SK Hynix benefited from AI capital expenditure. On July 13, Goldman Sachs found that over 1.2 million retail traders in Korea who used leverage received margin calls — and of those, 320,000 to 360,000 lost all their money in liquidations. For perspective, that means margin calls went out to one in every 30 adults across Korea in a single day.

Overall, CNBC reported that the situation has raised concerns about the broader impact of leveraged trading in the AI sector.