How to lose $35 Billion Dollars Betting on AI
ColdFusion · 2026-09-16 · 22 min
https://www.youtube.com/watch?v=7K_sA6o1dOEVideo summary
Leopold Aschenbrenner’s AI fund fell from $45 billion to $10 billion after 4x leverage magnified a market reversal.
At 23, former OpenAI researcher Leopold Aschenbrenner launched Situational Awareness LP, pitching investors on his forecast that AGI could arrive by 2027. Backed by prominent Silicon Valley investors, the fund grew from $225 million to a reported $45 billion, betting on AI infrastructure stocks while shorting software companies. But the positions shared the same underlying AI thesis, and roughly 4x leverage left little room for error. In July 2026, AI-related shares plunged as cheaper Chinese open-weight models unsettled markets, while the software stocks he had shorted rose. Prime brokers demanded more collateral, and the fund’s value dropped to about $10 billion. Citadel bought roughly $16 billion of stock at a discount, helping the fund avoid collapse; an estimated $5 billion Anthropic stake remained illiquid. Aschenbrenner then invested another $400 million in a private company and returned to buying some of the stocks that had fallen. The story’s central lesson: conviction in AI is not a substitute for balanced trades, careful timing, and risk management.
Chapters
- 0:00The $35 Billion Crisis: Leopold Aschenbrenner loses $35 billion during his wedding week
- 2:08From FTX to OpenAI: Leopold's Columbia-to-FTX path and 2027 AGI essay
- 3:36Situational Awareness: OpenAI security dispute and Tim Ferriss's “Nostradamus of AI” praise
- 5:27The Investment Pitch: AGI-driven compute demand attracts Stripe's Collison brothers and Nat Friedman
- 6:48A Divisive Wunderkind: Leopold's prodigy reputation meets questions about an early AI thesis
- 9:31Sponsor: Wispr Flow
- 11:17The Trading Strategy: 400% leverage on AI infrastructure longs and software shorts
- 12:53Market Collapse and Exit: Chinese AI competition triggers a $35 billion loss and Citadel sale
- 15:21The Leverage Trap: 4:1 exposure, options, and a 57% SanDisk plunge
- 17:22Risks of Conviction: Shared AI exposure and leverage leave no protection from a drawdown
- 19:14Lessons and Fallout: Cliff Asness's Kelly warning, uncertain AGI, and Leopold's return to AI stocks
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