What was Aschenbrenner’s plan if the AI revolution didn’t pan out quite as hoped? The hedge fund founder had no detailed response, the investor recalled. Aschenbrenner simply truly believed it would all work out.
An early answer to that question arrived last week. When AI stocks dropped quickly, felled by questions about whether the technology would be quite as transformative as promised, Goldman Sachs – one of Situational Awareness’ larger lenders – demanded the payback of some of its loans, according to two bankers involved in the process.
The hedge fund couldn’t – not without holding a last-minute fire sale. Over the next 30 hours, it worked to get rid of roughly US$20 billion in stocks. As it frantically called rivals for help, the firm’s representatives claimed that it was hocking a portfolio of so-called hedges, or modest investments meant to protect from risk, that were now in distress, according to three people briefed on the entreaties.
That made little sense as potential buyers examined what was for sale: these were monster bets, many against companies like Adobe that the fund thought would be replaced by AI but now suddenly appeared stronger than ever, the three people said. These wagers formed a huge swathe of the firm’s total investments.
Scared to take on so much risk, some passed on the stocks on offer. Hedge fund Citadel eventually came to an agreement to buy much of them at a discount, a deal sealed in an early morning phone call between Aschenbrenner and Citadel’s billionaire founder Kenneth Griffin.
Situational Awareness survived. One person briefed on what remains said it had roughly US$8b left, down from around US$30b at the start of July. Most of that is private stakes in companies such as Anthropic, which the firm has wide latitude to value and may or may not be worth what the firm hopes in the end. A minority of what remains is in publicly traded stocks, the backbone of the firm’s original investment thesis.
“We let you down,” Aschenbrenner wrote to investors, according to a letter viewed by The New York Times. He vowed to “fight another day”. Aschenbrenner declined through a representative to be interviewed.
The story of Situational Awareness is in some way an old Wall Street lesson learned by every generation and then forgotten by the next. Hot hedge funds, particularly those tied to trendy new investments like AI, burn bright and then sometimes fall, in some cases taking down the broader markets with them. Indeed, that appeared to have been on the minds of many on Wall Street, as news of the company’s struggles broke. Investor Daniel Loeb posted to social platform X a link to purchase the book When Genius Failed, about the rapid demise of an infamous hedge fund, Long Term Capital Management.
For now, there is no evidence of an immediate mushroom cloud. AI stocks rallied after Citadel came to the fund’s rescue, and the market continued to rise. But that’s being treated on Wall Street as evidence of a reprieve rather than permanent proof that the implosion will be contained.
A German native raised in Berlin, Aschenbrenner enrolled at Columbia University at age 15, studying economics and statistics. He graduated four years later as valedictorian and declined a spot at Yale Law School, choosing instead to work at the philanthropic arm of crypto brokerage FTX, where he worked on so-called effective altruism, a controversial means of using data to optimise charitable giving. FTX itself soon spectacularly imploded.
He later joined OpenAI for a spell, set apart among the stereotypically nerdy staff by cutting a striking figure: a tall, thin man who combed his hair into a sweeping coif and wore fleeces over turtleneck sweaters.
OpenAI fired him in April 2024, accusing him of leaking company secrets, he has said. He later acknowledged that he had shared a document with several outside researchers, but claimed the document did not include confidential information. He also disputed that this was the reason he was fired, arguing it was related to a separate memo he sent to the OpenAI board in 2023 raising concerns about the company’s security practices.
Two months later he wrote an essay, titled “Situational Awareness”, that went viral across Silicon Valley. It predicted that research labs would develop a superintelligent form of AI by 2027, and proposed an investment fund to capitalise on this potential development. Strangers reached out trying to invest money, prompting him to start a hedge fund.
As recently as this month, Situational Awareness was still telling investors it would be a good time to invest more money with the fund.
And even amid the fire sale this week, the office was calm, said two people who spoke to employees there. One of the only signs that anything had changed was a security guard newly added to the premises.
Aschenbrenner juggled calls with Wall Street banks and frantic investors with last-minute plans for his wedding, to a member of Anthropic’s staff, slated for next weekend in Carmel, California.
It’s still on.
This article originally appeared in The New York Times.
Written by: Rob Copeland
Photographs by: Nicholas Albrecht
©2026 THE NEW YORK TIMES
