In the world of high finance, genuine crises rarely begin with an official announcement—they start with a desperate, whispered phone call.

On the afternoon of July 29th, David Mann was in a taxi heading to LaGuardia Airport when his phone rang. The caller urgently asked if he would be willing to take over the Anthropic stake held by Situational Awareness, a hedge fund run by the so-called "AI stock guru." Mann understood everything in an instant—nobody rushes to dump pre-IPO shares in an AI giant approaching a $1 trillion valuation unless they are completely cornered. He realized that Leopold Aschenbrenner, the fund's "AI oracle," was facing a fatal liquidity crisis.

That single phone call became the starting gun for Wall Street's vultures to scent blood. News spread rapidly, reaching top investors like Steve Cohen, while short sellers and competitors swarmed in like sharks drawn to the scent of blood. "It felt like he was being hunted," one insider described the suffocating atmosphere. Under the relentless pressure of margin calls from banks, a coordinated attack against this highly leveraged fund quickly took shape.

Twenty minutes before the US market opened on July 30th, a cornered Situational Awareness was forced to sign documents with Citadel, selling off its heavily concentrated chip stock portfolio at a discount. Within just 72 hours, this crowded AI leveraged trade had completely collapsed, ultimately resulting in a staggering loss of approximately $35 billion. Aschenbrenner's name now sits at the top of the list of the largest trading losses in global history—a list no one ever wants to be on.

From "AI Prophet" to a Billion-Dollar Gamble

The story began with an essay. In 2024, Aschenbrenner, a former OpenAI employee, published a 165-page paper titled "Situational Awareness: The Decade Ahead," systematically forecasting the trajectory of AI development. The paper caused a sensation in both Silicon Valley and on Wall Street. He then used it as the foundation to launch his eponymous hedge fund, Situational Awareness.

The fund's logic was simple yet aggressive: heavily bet on AI supply chain winners—chip manufacturers, data center operators, and power suppliers—while simultaneously shorting software companies he believed AI would disrupt. This was not a product designed for conservative pension funds. As John Pfeffer, co-founder of early investor Pfeffer Capital, put it: "This is an aggressive bet on AI. We all knew there would be wild swings."

Wall Street welcomed the young man with open arms. Goldman Sachs provided financing from the very beginning and even promoted him at its Emerging Manager Conference in Orlando in March 2025. JPMorgan, Bank of America, and Citigroup also extended loans, while Morgan Stanley was in talks to bring him on as a client.

Money poured in, and the fund's assets ballooned from roughly $1.5 billion in the summer of 2025 to over $45 billion by early July. At the same time, leverage rose accordingly—according to insiders, Situational borrowed $3 or more for every $1 of its own capital, with leverage reaching as high as 400% during certain periods, far exceeding industry norms. The fund also purchased custom derivatives like "flex options" to further amplify its bets.

Over Half the Portfolio in Just Two Memory Chip Stocks

According to the 13F regulatory filing disclosed last Friday, the fund's concentration risk before the collapse was astonishing. As of the end of June, SanDisk topped the fund's US equity holdings at $5.7 billion, with Micron Technology close behind at $5.6 billion. Together, these two memory chip stocks accounted for more than 56% of the fund's total holdings—a bet of over half the portfolio on just two companies in the same sector.

The remaining top five holdings were also AI infrastructure names: Bloom Energy, TSMC, and Nebius Group. The fund also held $745 million in CoreWeave. These heavy holdings collapsed collectively in July: SanDisk plunged nearly 47% in a single month, Micron fell about 29%, Bloom Energy dropped 32%, Nebius declined 31%, and TSMC slid 15%. Meanwhile, the software stocks the fund was shorting—Adobe, AppLovin, and Figma—began to rebound. Losses on both sides of the trade compounded, causing the situation to deteriorate rapidly.

It should be noted that the 13F only discloses US-listed long positions as of the end of June and does not fully capture the fund's overall risk profile, including shorts, derivatives, or intraday trading. But the filing is enough to prove a core fact: on the eve of the collapse, Situational Awareness's risk exposure was highly concentrated in the AI infrastructure chain, particularly memory chips. When a crowded trade meets a price reversal, leverage turns a routine drawdown into a fight for survival.

Wall Street's Vultures Circle

Information travels on Wall Street far faster than anyone imagines. Every day, prime brokers distribute reports to clients summarizing the position changes of their hedge fund customers. Throughout July, these reports showed a steady decline in tech sector leverage—a clear signal that some large tech-heavy fund was being forced to deleverage.

Short sellers quickly locked onto their target. They zeroed in on Aschenbrenner's heavy holdings, and as those stocks began to fall, they judged that he was in trouble and intensified their shorting pressure. Simultaneously, an unusually high volume of put options linked to Situational's positions flooded the market.

During the week of July 27th, Situational began selling stocks to meet lenders' margin calls. Nebius, Bloom Energy, SanDisk, and Core Scientific fell between 9% and 24% from July 24th to 28th. Top investors including Steve Cohen and Daniel Loeb also heard about the planned sale of the Anthropic stake. "It felt like he was being hunted," said Pfeffer Capital's John Pfeffer.

The 72-Hour Life-or-Death Battle: Citadel's Midnight Bargain

By Wednesday, July 29th, it was an open secret: at least one major Wall Street fund was "deleveraging" and dumping assets on a massive scale. Aschenbrenner and his team entered emergency negotiations, attempting to sell the fund's roughly $5 billion stake in Anthropic. But they faced a critical constraint: Anthropic held approval rights over any share transfer, so the stake could only be sold to institutions that already held Anthropic shares.

That day, Situational approached Sequoia, Greenoaks, Michael Dell's family office DFO Management, and New York investment firm XN, offering a 10% discount with a 12-hour deadline. Greenoaks worked through the night, and the deal was set to close at 8:00 AM the next morning, with Anthropic's approval already secured.

However, even as the Anthropic negotiations progressed, Aschenbrenner quietly opened another line—talks with Citadel and Millennium Management to sell the stock portfolio. On July 28th, a senior Citadel executive proactively contacted Situational's Sven Khatri. Negotiations moved swiftly: from Citadel acquiring the entire liquid stock portfolio to ultimately only the leveraged-financed positions. Ken Griffin himself joined the talks from London. Aschenbrenner was reluctant to give up too much—he believed there was still upside after the crisis and wanted to retain as much of the portfolio as possible.

In the early hours of Thursday, July 30th, Citadel secured the deal at approximately a 10% discount. That morning, Aschenbrenner informed the investors who had been waiting to complete the Anthropic share transfer that he had struck a better arrangement with Citadel. Some investors were furious. Situational and Citadel signed the final documents at approximately 9:10 AM, just 20 minutes before the US market opened.

The Largest Hedge Fund Blowup in History: $35 Billion in Losses

Shortly after, Situational disclosed its monthly results to investors: a loss of approximately 67% for July, or roughly $30 billion. Including broader asset losses, the total damage reached approximately $35 billion. According to the Financial Times' ranking of the largest trading losses in history, Aschenbrenner's losses now rank among the top globally, surpassing numerous rogue bank traders and hedge fund collapse cases, making it one of the largest single-month hedge fund losses on record.

The shockwaves from this collapse spread across all of Wall Street. Jane Street, one of Situational's investors, reportedly lost approximately $15 billion in July, with most of that stemming from its exposure to Aschenbrenner's fund. The fund's assets shrank from over $45 billion at its July peak to roughly $10–15 billion after the Citadel deal. This is yet another bloody lesson in leverage risk on Wall Street, following the Archegos Capital blowup.

A Bittersweet Wedding Toast and the Road to Rebuilding

That weekend, Aschenbrenner married Avital Balwit, chief of staff to Anthropic founder Dario Amodei, on the coast of Carmel, California. During the wedding toasts, someone half-jokingly thanked Ken Griffin and Citadel for "making this day possible."

Currently, Aschenbrenner and his management team are meeting with investors one by one, explaining how the fund lost so much in such a short period. They say they are conducting a thorough post-mortem and reassessing their future risk tolerance boundaries. The fund is now rebuilding its portfolio. Situational recently invested $400 million in startup Source Foundry and has begun buying shares in SharonAI. In a letter to investors, Aschenbrenner stated that the fund has taken necessary measures to ensure its survival and pledged to learn from this experience.

From the fund's inception through the end of June 2026, Situational's cumulative return exceeded 1,000%. Yet one month of collapse nearly wiped everything back to zero. That may be the cruelest footnote to this story: in the world of leverage, the line between myth and disaster is merely a single shift in market sentiment.