Before the 'AI Stock God Liquidation': Top Wall Street leaders vied to show support, but institutional investors collectively avoided it

A hedge fund backed by a 24-year-old founder betting on artificial intelligence quickly rose to become one of the world’s largest within a few years, only to experience dramatic turmoil in July. This rollercoaster journey highlights the potential risks of aggressive leverage strategies amid the current AI investment craze.

Assets under management at Situational Awareness once swelled to $45 billion, but in July, several of the fund’s large stock holdings plummeted, prompting lenders to issue margin calls and forcing the fund to liquidate assets urgently.

Ultimately, the fund sold most of its publicly traded stock portfolio to Ken Griffin’s Citadel in order to address liquidity pressures.

According to The Wall Street Journal, some fund investors had already warned founder Leopold Aschenbrenner about his heavy use of leverage before the crisis broke out, voicing dissatisfaction with insufficient information disclosure.

Additionally, unlike peer hedge funds of similar size, which typically rely on institutional investors such as pension funds, university endowments, and sovereign wealth funds, the fund’s capital primarily comes from wealthy individuals.

The report cites sources as saying that institutional investors have largely steered clear due to Aschenbrenner’s lack of an assessable historical investment track record.

Situational Awareness has attracted a group of highly influential investors from both Silicon Valley and Wall Street.

According to The Wall Street Journal, sources indicate investors include D1 Capital Partners founder Dan Sundheim, Greenoaks co-founder Neil Mehta, funds managed by XN founder Gaurav Kapadia, and Feroz Dewan, former head of public equities at Tiger Global Management.

Other investors comprise Stripe co-founders Patrick Collison and John Collison, Meta Platforms AI chief Daniel Gross and Nat Friedman. Some investors may have participated through foundations, family offices, or other entities.

Of particular note, market making giant Jane Street also allocated capital to the fund.

This move surprised many Wall Street veterans, as Jane Street rarely entrusts capital to external managers. Tax and regulatory filings indicate that Laniakea Charitable Foundation chairman and director Matthew Wage is a trader at Jane Street.

This impressive lineup of investors is largely the result of Aschenbrenner’s personal social network.

According to sources cited by the report, at a wedding held last weekend in Carmel, California, Jane Street co-founder Rob Granieri, Situational advisor and East Rock Capital co-founder Graham Duncan, and Dewan were all present.

The investor composition of Situational Awareness is distinctly different from funds of similar scale.

Normally, a $45 billion hedge fund would draw capital primarily from institutions such as pension funds, university endowments, sovereign wealth funds, and private banks.

Situational’s investor base, however, is dominated by high-net-worth individuals. The core reason is that institutional investors are generally unwilling to entrust funds to an unproven fund manager with no professional investment record.

Research and consulting firm Aksia met with Aschenbrenner in March 2025 and in a subsequent client evaluation report, acknowledged his intelligence and network resources.

However, according to this document obtained by The Wall Street Journal, Aksia also warned that potential investors in Situational “should be alert to risk management issues arising from overconfidence, especially given the fund’s substantial use of leverage.”

On information disclosure, Aschenbrenner did not follow the common hedge fund practice of providing monthly performance updates to investors, instead disclosing returns only on a quarterly basis. This further aggravated dissatisfaction among some investors.

Aschenbrenner officially launched the fund in 2024.

After a series of forward-looking stock picks—including prescient bets on memory chipmaker SK hynix and SanDisk—the fund’s scale expanded rapidly, becoming one of the fastest-growing hedge funds in recent years. This impressive track record earned him the nickname “AI stock guru.”

Strategically, the fund’s offering documents are highly liberal, explicitly stating there are no limits on the types of securities, position direction, concentration, or leverage usage.

It was this unrestricted leverage strategy that sowed the seeds of crisis when AI-related positions suffered heavy losses in July.

Currently, the fund still holds a group of private investments, including the cloud computing startup Fluidstack, AI chip startup MatX, and a multi-billion-dollar stake in Anthropic.

If these companies continue to appreciate, especially Anthropic, which is expected to go public later this year, they could provide new sources of return for the fund and serve as important buffers against the current shock.