Aschenbrenner's AI fund shrinks to $10bn after Citadel rescue
Leopold Aschenbrenner's heavily leveraged $45 billion AI hedge fund narrowly avoided liquidation this week, selling assets to Citadel at a deep discount and highlighting the fragility of crowded infrastructure trades.
Leopold Aschenbrenner’s Situational Awareness hedge fund narrowly survived a severe liquidity crisis this week, just days before his wedding. The fund, which managed $45 billion in capital, was forced to sell the bulk of its public equity portfolio to Ken Griffin’s Citadel at a discount of more than 10% to meet urgent margin calls.
The near-collapse highlights the structural fragility of highly leveraged, crowded trades in AI infrastructure. Aschenbrenner had borrowed three to four dollars for every dollar of capital to build a concentrated portfolio of memory chip and data center stocks, including CoreWeave and SK Hynix.
For two years, this strategy delivered massive returns. However, as traders began questioning the lack of clear returns on massive AI capital expenditures, memory stocks tanked. The semiconductor sector suffered its worst month since 2002, with names like SK Hynix and SanDisk plunging roughly 30%.
This sudden drop triggered a lethal dynamic for a leveraged fund. Rival traders identified Situational Awareness's concentrated positions and aggressively shorted them, betting that Aschenbrenner would be forced to sell. As banks demanded more collateral, he had to liquidate holdings, driving prices down further.
In a Thursday letter to investors, Aschenbrenner compared the situation to a bank run, describing how "vulnerability begetting more vulnerability" ravaged the portfolio. By Wednesday, he was desperately seeking private capital to stave off collapse.
Bloomberg reported that he approached Sequoia and Greenoaks about buying a $3.5 billion portion of his Anthropic stake, but those talks fell apart. Stripe founders Patrick and John Collison, who seeded the fund, spent hours at his offices as he negotiated deep into the night. Citadel ultimately won the bidding over Millennium, buying the public assets before Thursday's opening bell.
The fund survived with just $10 billion in remaining capital, having lost 67% in October. However, because the Anthropic stake remained intact, the fund is still up 80% on the year. Aschenbrenner told investors his leverage and shorts were completely gone. "I take full responsibility for these events," he wrote.
The financial rescue precedes a personal milestone. Aschenbrenner is marrying Avital Balwit, chief of staff to Anthropic CEO Dario Amodei, this weekend in Carmel, California. He will spend next week conducting phone calls with shaken investors rather than enjoying his planned forest spa honeymoon.
