Leopold Aschenbrenner’s hedge fund Situational Awareness has completely unwound its investment portfolio after suffering heavy losses on its AI and software trades, according to CNBC’s David Faber. The fund sold its entire portfolio to another hedge fund as it worked to exit its positions. The hedge fund managed around $20 billion to $24 billion in assets before the unwind.
The fund came under pressure after losses from AI-related investments and short bets against software companies hurt its portfolio. Earlier, Bank of America, Goldman Sachs and JPMorgan Chase helped the fund manage its positions and meet margin requirements, according to earlier CNBC reporting citing people familiar with the discussions.
The banks also helped the fund reduce its positions in an orderly manner instead of forcing a rushed sell-off. Before Thursday’s trading session, prime brokers were already marketing both the fund’s long and short positions to potential buyers.
The fund also approached its existing investors and lenders to raise fresh capital as financial pressure increased. Situational Awareness additionally offered parts of its investment portfolio directly to some investors. One person familiar with those discussions said these efforts were “ad hoc rather than a coordinated fundraise,” according to the Financial Times.
How the fund went from huge gains to heavy losses
Situational Awareness reported an impressive 439% net return through June 30, according to a July 24 investor letter. The strong returns were boosted by the fund’s use of leverage, which amplified gains during the AI stock rally. However, the same leverage increased losses when AI-related stocks fell sharply in July.
CNBC reported that investments in AI infrastructure companies, including SK Hynix, lost value during the market decline. At the same time, the fund’s short positions against software companies such as Adobe also moved against it. Several publicly disclosed holdings of the fund dropped more than 35% during July.
Those stocks included Nebius, SanDisk, Micron and CoreWeave. The wider technology market also weakened during the month, adding pressure on the fund’s portfolio, according to the Financial Times. The Nasdaq 100 fell about 10% in July. South Korea’s Kospi index also lost roughly one-third of its value during the same period.
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The fund’s massive options exposure
Situational Awareness’s March 31 Form 13F showed it held $13.68 billion across 42 investments. Around $8.46 billion, or 62% of the portfolio’s reported value, consisted of put-option exposure linked to semiconductor and technology stocks. The fund’s biggest reported put-option position was $2.04 billion tied to the VanEck Semiconductor ETF.
Another major position was $1.57 billion tied to Nvidia. The reported values represented the value of the underlying securities, not the amount paid for the options, according to the filing. The filing did not disclose important details such as the options’ strike prices, expiration dates, leverage used or offsetting positions. Because of those missing details, it is impossible to know whether the put options were bearish bets or simply hedges protecting the portfolio.
Anthropic stake put up for sale
The hedge fund also marketed its private-company investments, including its stake in Anthropic, according to CNBC. Potential buyers have shown interest in the Anthropic stake. However, the size of the proposed sale and the possible price have not been disclosed. Situational Awareness participated in Anthropic’s Series H funding round in May.
That funding round valued Anthropic at $65 billion. After the funding round, Anthropic’s post-money valuation reached $96.5 billion. Anthropic confidentially filed a draft registration statement on June 1.
In his July investor letter, Aschenbrenner said a possible Anthropic IPO could become a major catalyst during the second half of the year. The same investor letter also opened an August 1 subscription window for investors. In the letter, the technology stock sell-off was presented as an opportunity for investors to commit additional capital.