The "biggest myth" of this round of bull market has come to an end! The "AI stock god" Leopold was crushed in just a few weeks, and Citadel took over $16 billion in stock assets.

Author: Long Yue, Wall Street Insight

A 24-year-old young man raised $45 billion on Wall Street with a long article predicting that AI will change the world, and made a staggering 439% profit in the first half of this year. However, in the past month, during a significant downturn in the AI sector, he lost all his two years of accumulated myth at once.

On July 30, a piece of news circulated on Wall Street:

A hedge fund with only eight employees, in the past 36 hours, sold all of its publicly traded positions—about $16 billion in stocks—through a single transaction to a competing firm.

The buyer is Citadel, one of the largest hedge funds in the world, founded by Ken Griffin, managing $71 billion.

This fund, forced to cut losses, is called Situational Awareness (abbreviated as SA), founded by Leopold Aschenbrenner.

It is worth mentioning that Aschenbrenner's fiancée Avital Balwit is the Chief of Staff to Anthropic CEO Dario Amodei. This collapse of AI and his forced liquidation happened just before their wedding.

Just a few weeks ago, he was still one of the most sought-after names on Wall Street and Silicon Valley.

The “AI Prophet” Adored by Silicon Valley

Leopold Aschenbrenner, German, 24 years old.

He entered Columbia University at 15 and graduated first in his class at 19. After graduation, he joined OpenAI's "super alignment" team, specifically researching how to align superintelligence with human values. In 2024, OpenAI fired him, citing “improper disclosure of internal information.” He denies it, claiming he simply shared a planning document that was not confidential with external researchers for feedback; the real trigger was a memo he wrote internally criticizing OpenAI’s safety measures.

After being fired, he did something many did not expect—wrote a 165-page long article titled "Situational Awareness."

The core assertion of the article is: AI is developing at a pace far beyond external expectations, and by 2027, AI will be able to conduct AI research independently, and humanity will face true superintelligence. All of this requires an explosive expansion of chips, memory, data centers, and power infrastructure.

This article caused a stir in Silicon Valley. Some called it "the most important article in a decade." Podcast host Tim Ferriss referred to him as "the Nostradamus of AI".

In 2024, he secured about $225 million in seed funding to establish a fund named SA. Investors included Stripe co-founders Patrick and John Collison, former GitHub CEO Nat Friedman, and institutions like Jane Street.

With no industry experience, he jumped in to manage billions of dollars directly. The fund’s size rapidly expanded, peaking at nearly $45 billion in early July 2026.

The entire fund had only eight employees, four of whom were investment professionals.

The “AI Stock God” Bets Four Times on AI, Profiting 439% in Six Months

SA's investment logic is very straightforward: since AI requires a lot of computing power and infrastructure, they heavily invested in companies providing that computing power and infrastructure.

Long positions: SK Hynix (Korean semiconductor/memory), Nebius (AI cloud platform), SanDisk (storage chips), Micron (memory chips), CoreWeave (AI cloud computing), Bloom Energy (energy).

Short positions: Shorting traditional software companies like Adobe—the logic being that AI would disrupt them.

At the same time, the fund magnified its returns by borrowing money from banks (i.e., leverage), with a leverage ratio of about four times.

This structure has a feature: banks hold the actual stocks, and SA obtains economic exposure and leverage through a “Total Return Swap” (TRS). The benefit is that returns multiply, but the downside is that if stock prices drop, banks will require additional margin (maintenance margin).

From 2025 to the first half of 2026, this strategy had stunning results.

As of the end of June 2026, SA's net return reached 439%. Reports indicate that the fund has accumulated returns of over 2000% since its inception. The fund’s size grew from less than $1 billion at the start to about $45 billion in early July.

Some early investors saw returns as high as 200% this year.

Struck from Both Sides in a Month

However, good times didn't last long. In July, AI stocks began to decline.

The market started to question: Can the high valuations of AI infrastructure be sustained? A large amount of capital withdrew from AI hardware stocks.

SA's long positions bore the brunt:

Nebius dropped about 48% from its June peak, losing about $35 billion in market value.
SanDisk fell over 56% in just over a month.
CoreWeave, Micron, and SK Hynix all saw declines over 35% this month.

Meanwhile, SA's shorted software stocks (like Adobe) conversely rose, causing losses on short positions as well.

With losses on both ends, the four times leverage amplified the damage. Banks began issuing margin call notices.

This is what Wall Street refers to as "additional margin": you borrowed money to buy stocks, and when the stocks dropped, the bank asked you to pay additional margin, or else they would force liquidation. This is fundamentally the same logic as margin calls in the A-shares market.

SA's main brokers included Bank of America, Goldman Sachs, and JPMorgan Chase, with all three stepping in to help the fund handle margin calls or orderly reductions in positions.

Interestingly, on July 24, Aschenbrenner even wrote in a letter to investors: "Sometimes we specifically point out that now is a good time to increase positions—if you've been waiting." At the end of the letter, he invited investors to add funds on August 1.

36 Hours, An Overnight Auction

The crisis evolved rapidly within 36 hours.

On the night of July 29, SA issued urgent pleas to several potential buyers, seeking to sell over $10 billion in stocks to stabilize the situation. This news was widely reported by the Financial Times, Bloomberg, and others.

Bidders included: Millennium Management (a top multi-strategy hedge fund globally), Jane Street (one of SA's investors).

Millennium made a bid but deemed the risk of this position too high and was unwilling to pay a high price.

Ultimately, Citadel emerged victorious.

On the morning of July 30, the transaction was completed. Citadel took over all of SA's publicly traded stock positions worth about $16 billion at a steep discount—including both long and short positions. This was one of the largest emergency stock trades in Wall Street history.

After the news of the transaction broke, the Nasdaq 100 index surged over 3% on that day—relieving the market: SA would no longer have to dump stocks into the market.

Citadel has done this sort of thing before. Historically, it has acquired the assets of companies like Enron at low prices during crisis. In Ken Griffin's own words, one reason Citadel can continue to succeed is: “Experience. It’s wisdom acquired through losses and pain. My leadership team and I have gone through many of the toughest moments in the market, learned many painful lessons. But that makes us more effective investors in times of turmoil and crisis.”

Citadel was founded in 1990. SA was established in 2024.

What Remains

After the transaction was completed, SA's management scale plummeted from a peak of $45 billion to about $10 billion, more than halving.

But Aschenbrenner was not completely wiped out.

SA retained all private equity positions, about $10 billion, of which the most significant portion is the equity in Anthropic, valued at about $5 billion. SA will continue to operate in the form of a private equity fund.

Whether these private assets can be realized depends on the future valuation of companies like Anthropic when they go public.

This is an unresolved question.

By the way, Aschenbrenner's fiancée Avital Balwit is the Chief of Staff to Anthropic CEO Dario Amodei. SA was previously rumored to be selling its equity in Anthropic, but a spokesperson for SA denied this claim.

Where Did He Go Wrong

The most intriguing question about this matter is: Was Aschenbrenner's judgment on AI wrong?

Not necessarily.

The long-term demand logic for AI infrastructure is still widely acknowledged by many institutions.

The problem lies in the position structure.

Someone on X referenced Ken Griffin's earlier description of reasons for fund manager failures: "Your portfolio is highly concentrated, with massive positions, yet you cannot clearly articulate where your competitive advantage lies in holding these positions."

SA's problem was precisely this: heavily concentrated on a single theme (AI infrastructure), while simultaneously leveraging four times, betting on both sides of the same narrative. Once the market direction changes, there’s no buffer.

This structure can create a 439% return when rising, but can also blow up the entire public position in just weeks when falling.

As someone summarized: "His judgment on AI wasn't wrong. He was wrong in how he constructed his positions."

The Other Side of the Myth

Aschenbrenner's story is one of the most extreme examples of this AI bull market.

One article, one narrative, eight people, $45 billion, a 439% return—then within a month, crushed by margin call notifications.

This is neither the end of AI nor the end of Aschenbrenner.

But it clearly illustrates one thing: Being right about the direction doesn’t guarantee you will survive until that direction is realized.

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