The "Greatest Myth" of This Bull Market Comes to an End! In Just a Few Weeks, the "AI Stock God" Is Defeated as Citadel Acquires All Positions

A 24-year-old young man raised $45 billion on Wall Street based on a long essay predicting that AI would change the world, earning a staggering 439% in the first half of this year. However, during the recent month-long plunge in the AI sector, he lost the myth he had built over two years in one fell swoop.

On July 30, news circulated on Wall Street:

A hedge fund with only eight employees sold its entire public market portfolio—approximately $16 billion worth of stocks—to a counterparty in a single transaction within the past 36 hours.

The buyer was Citadel, one of the world's largest hedge funds, founded by Ken Griffin, with assets under management of $71 billion.

The fund forced to cut its losses is called Situational Awareness (SA), founded by 25-year-old Leopold Aschenbrenner.

Notably, Aschenbrenner's fiancée, Avital Balwit, is the Chief of Staff to Anthropic CEO Dario Amodei. This AI crash and his liquidation occurred precisely on the weekend before their wedding.

Just a few weeks prior, he was the most sought-after name on Wall Street and in Silicon Valley.

The "AI Prophet" and "AI Stock God" Praised by Silicon Valley

Leopold Aschenbrenner, a German national, is 24 years old.

He entered Columbia University at age 15 and graduated at the top of his class at 19. After graduation, he joined OpenAI's "Superalignment" team, specializing in researching how to ensure superintelligence aligns with human values. In 2024, OpenAI fired him for "improperly leaking internal information." He denied this, stating that he merely shared a largely non-confidential planning document with external researchers for feedback, and that the real trigger was an internal memo he wrote criticizing OpenAI's safety measures.

After being fired, he did something unexpected—he wrote a 165-page essay titled "Situational Awareness."

The core argument of the article was: The speed of AI development far exceeds external expectations. By 2027, AI will be capable of conducting autonomous AI research, and humanity will face true superintelligence. All of this requires an explosive expansion of chips, memory, data centers, and power infrastructure.

This article caused a sensation in Silicon Valley. Some called it "the most important article of the decade." Podcast host Tim Ferriss referred to him as "the Nostradamus of the AI world."

In 2024, he launched the eponymous fund SA with approximately $225 million in seed capital. Investors included Stripe co-founders Patrick and John Collison, former GitHub CEO Nat Friedman, and institutions such as Jane Street.

With no prior industry experience, he directly managed billions of dollars. The fund's size rapidly expanded, reaching a peak of nearly $45 billion in early July 2026.

The entire fund had only eight employees, four of whom were investment professionals.

Heavyweight Positions in AI Infrastructure, Leverage Amplified Fourfold

SA's investment logic was very direct: Since AI requires massive computing power and infrastructure, take heavyweight positions in companies providing computing power and infrastructure.

Long positions: SK Hynix (South Korean semiconductor/memory), Nebius (AI cloud platform), SanDisk (storage chips), Micron (memory chips), CoreWeave (AI cloud computing), Bloom Energy (energy).

Short positions: Shorting traditional software companies like Adobe—the logic being that AI would disrupt them.

Simultaneously, the fund amplified returns by borrowing from banks (i.e., leverage), with a leverage ratio of approximately 4x.

This structure has a characteristic feature: Banks hold the physical stocks, while SA synthetically obtains economic exposure and leverage through "Total Return Swaps" (TRS). The benefit is multiplied returns, but the downside is that if stock prices fall, banks will demand additional margin (margin calls).

From 2025 to the first half of 2026, this strategy yielded astonishing results.

As of the end of June 2026, SA's net return rate reached 439%. The fund's size grew from less than $1 billion at inception to a peak of approximately $45 billion in early July.

Some early investors saw returns as high as 200% this year.

On July 24, Aschenbrenner wrote in a letter to investors: "Sometimes we specifically point out that now is a good time to add positions—if you have been waiting." A postscript at the end invited investors to add capital on August 1.

Hit from Both Sides Within Three Weeks

However, good times did not last. In July, AI stocks began to decline.

The market began to question: Can the high valuations of AI infrastructure be sustained? Large amounts of capital withdrew from AI hardware stocks.

SA's long positions bore the brunt:

• Nebius fell approximately 48% from its June high, wiping out about $35 billion in market value
• SanDisk dropped more than 56% in just over a month
• CoreWeave, Micron, and SK Hynix all fell more than 35% this month

At the same time, the software stocks SA was shorting (such as Adobe) rose instead, causing losses on the short positions as well.

Losses on both long and short sides, amplified by 4x leverage, led banks to issue margin calls.

This is what Wall Street calls a "margin call": You borrow money to buy stocks, the stocks drop, and the bank demands you deposit additional margin, otherwise they will forcibly liquidate your positions. This is the same logic as margin trading blow-ups in the A-share market.

SA's prime brokers included Bank of America, Goldman Sachs, and JPMorgan Chase. All three intervened to assist the fund in meeting margin calls or reducing positions in an orderly manner.

Notably, Aschenbrenner's fiancée, Avital Balwit, is the Chief of Staff to Anthropic CEO Dario Amodei. This crash occurred precisely on the weekend before their wedding.

36 Hours, An Overnight Auction

The crisis evolved rapidly within 36 hours.

Late on the night of July 29, SA sent urgent requests for help to multiple potential buyers, seeking to sell over $10 billion worth of stocks to stabilize the situation. This news was widely reported by media outlets such as the Financial Times and Bloomberg.

Bidders included Millennium Management (a top global multi-strategy hedge fund) and Jane Street (one of SA's investors).

Millennium made an offer but considered the batch of positions too risky and was unwilling to bid a high price.

Ultimately, Citadel prevailed.

Early on the morning of July 30, the transaction was completed. Citadel acquired SA's entire public stock portfolio of approximately $16 billion—including both long and short positions—at a significant discount. This was one of the largest emergency stock transactions in Wall Street history.

After news of the completed transaction broke, the Nasdaq 100 Index surged more than 3% that day—the market breathed a sigh of relief: SA would no longer need to dump stocks into the market.

This is not the first time Citadel has done this. Historically, it has acquired assets from companies like Enron at low prices during crises. In Ken Griffin's own words, one of the reasons for Citadel's continued success is: "Experience. Wisdom bought with losses and pain. My leadership team and I have gone through many of the market's toughest moments and learned many painful lessons. But this has made us more effective investors during times of turmoil and crisis."

Citadel was founded in 1990. SA was founded in 2024.

What Remains

After the transaction, SA's assets under management plummeted from a peak of $45 billion to approximately $10 billion, a drop of more than half.

However, Aschenbrenner was not completely wiped out.

SA retained all its private positions, valued at approximately $10 billion, the most important part of which is its equity stake in Anthropic, valued at approximately $5 billion. SA will continue to operate as a private investment firm.

Whether these private assets can be realized depends on the valuations of companies like Anthropic when they go public in the future.

This remains an unresolved question.

Incidentally, Aschenbrenner's fiancée, Avital Balwit, is the Chief of Staff to Anthropic CEO Dario Amodei. SA was previously rumored to be selling its Anthropic equity, but an SA spokesperson denied this claim.

Where He Went Wrong

The most thought-provoking question about this incident is: Was Aschenbrenner wrong in his judgment of AI?

Not necessarily.

The long-term demand logic for AI infrastructure is still recognized by many institutions.

The problem lay in the position structure.

Someone on X quoted Ken Griffin's previous description of why fund managers fail: "Your portfolio is highly concentrated, with huge positions, yet you cannot clearly explain where your competitive advantage lies in holding these positions."

This was precisely SA's problem: Heavyweight positions in a single theme (AI infrastructure), combined with 4x leverage, betting on both sides of the same narrative with long and short positions. Once the market sentiment shifted, there was no buffer.

This structure could create a 439% return during uptrends, but could also blow up the entire public portfolio within weeks during downtrends.

As someone summarized: "His judgment on AI was not wrong. He was wrong in the way he constructed his positions."

The Other Side of the Myth

Aschenbrenner's story is one of the most extreme examples of this AI bull market.

One article, one narrative, eight people, $45 billion, 439% returns—and then, within three weeks, crushed by margin calls.

This is not the end of AI, nor is it the end of Aschenbrenner.

But it clearly illustrates one thing: Being right about the direction does not mean you will survive until the day the direction plays out.