Leopold Aschenbrenner’s AI Hedge Fund Plunges 67% in July, Sells Portfolio to Citadel

Leopold Aschenbrenner's artificial intelligence-focused hedge fund, Situational Awareness, experienced a portfolio value drop of 67% in July due to heavy losses on its AI stock bets. The fund has since sold most of its stock portfolio to billionaire Ken Griffin’s Citadel and unwound the majority of its public equities holdings, according to a Reuters report.

Steep Losses Force Portfolio Sale

In a letter to investors cited by the report, Aschenbrenner acknowledged the severity of the situation. "We came closer to permanent capital impairment than is acceptable to us," he wrote, adding that while a solution was found, "We let you down this month."

The dramatic losses highlight the risks associated with highly leveraged investment strategies. Hedge funds often use borrowed capital to amplify their market exposure, a tactic that can generate outsized returns but also leads to rapid, significant losses and potential margin calls from prime brokers when markets turn.

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Performance and Market Context

Despite the sharp July decline, the fund remains up 80% for the year 2026, according to the report. Aschenbrenner expressed continued optimism, stating that the underlying fundamentals of the fund's portfolio holdings continue to strengthen even as their share prices have fallen.

The fund's performance setback occurs amid a broader global selloff in semiconductor and AI-related stocks. The sector has faced growing concerns from some market participants about unsustainable valuations, prompting short sellers to increase their bets that stock prices will decline further.