Up 439%, Then Margin-Called: Did Leopold Aschenbrenner’s Situational Awareness Actually Blow Up?
Situational Awareness made 439% in six months. Then margin calls took its complete inventory guide in a single commerce. Ken Griffin’s Citadel purchased it.
1 / 4 of that fund’s final reported inventory holdings had been Bitcoin miners. That was not an accident, and it’s why crypto buyers are studying this story intently.
Who Is Leopold Aschenbrenner?
OpenAI employed him for its Superalignment crew in 2023 and let him go in April 2024. He has mentioned he was pushed out for elevating security issues.
In June 2024 he printed an essay collection known as Situational Awareness. Its central declare was blunt.
“AGI by 2027 is strikingly believable,” Leopold Aschenbrenner, in his essay series Situational Awareness, June 2024.
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AGI means software program that matches people at most duties. But the essay did greater than predict it. One chapter argued the actual bottleneck could be bodily. Power contracts, transformers and electrical energy provide, not chips.
He then constructed a hedge fund on that concept. Its first inventory disclosure, overlaying December 2024, listed six holdings value $254.8 million.
Every one was an influence or chip firm. Not one was crypto. That modified shortly.
What Happened to Situational Awareness This Week
July went badly. The fund owned reminiscence chip makers like SK Hynix, which fell laborious within the AI memory stock selloff.
It had additionally wager towards software program corporations equivalent to Adobe. That commerce pays off when a inventory drops. Those shares rose as a substitute. The wider market went the identical manner. The Nasdaq-100 fell 10% from its early June peak.
Borrowed cash turned a foul month right into a compelled one. The fund had used loans to carry extra inventory than its personal money may cowl.
When costs fell, its lenders wished extra money behind these loans. That demand is a margin name.
CNBC named Bank of America, Goldman Sachs and JPMorgan Chase because the brokers concerned. It additionally reported the fund had grown to $45 billion by the beginning of July.
Then it unwound each public inventory place, CNBC mentioned. Griffin’s Citadel hedge fund agreed to purchase them. Millennium Management and Jane Street seemed and handed, Bloomberg reported.
Where Do Bitcoin Miners Come In?
Crypto readers principally missed this half. Situational Awareness turned certainly one of mining’s bigger shareholders, and it occurred quick.
Big US funds should listing their inventory holdings each three months on a type known as a 13F. Five exist for this fund. Read so as, they present a wager being constructed.
The latest filing lists 29 holdings value $5.52 billion. Miners and their information middle arms make up $1.38 billion of it.
Core Scientific was the most important at $418.7 million. IREN got here subsequent at $328.6 million, then Applied Digital at $278 million.
Cipher Mining, Riot Platforms, Hut 8, WhiteFiber, Bitdeer, CleanSpark and Bitfarms made up the remainder.
The complete disclosed guide grew practically 22 occasions in a 12 months. The mining share went from nothing to 1 / 4 of it.
So the AGI fund turned a mining fund by design. His essay mentioned the bottleneck was energy. Miners personal energy, land and cooling, which is why miners became AI powerhouses.
There is a catch for shareholders. Anyone holding these shares in July shared the commerce with a fund dealing with margin calls. No mining firm knew, so none of them mentioned so.
Did Citadel Engineer This?
One concept unfold quick. It says Citadel scared the market about charge hikes, waited for Leopold to interrupt, then purchased his shares low cost.
The first half is true. Frank Flight, who runs macro technique at Citadel Securities, printed a note on July 27. He wrote that he now anticipated a charge hike on the July assembly.
Bloomberg reported the decision added to market nerves. Two days later, a Griffin agency purchased the inventory guide.
Four issues break the speculation.
- First, there are two Citadels.
Citadel Securities buys and sells shares for different individuals. Citadel is the hedge fund. They are separate corporations.
- Second, Flight had firm.
PGIM and Wrightson ICAP additionally known as for a hike. Bond veteran Harley Bassman wished one twice as massive.
- Third, the concern got here first.
Bloomberg tied it to grease costs rising after the US and Iran clashed once more, plus a robust job market.
- Fourth, the Fed didn’t hike.
It held rates steady, and three of its 12 voting members wished a quarter-point rise.
That final element issues. It was the primary time since September 2016 that three officers dissented in the identical course. The strain to boost charges was actual, and it sat contained in the Fed.
What Nobody Can Answer Yet
Did Citadel get a cut price? Nobody exterior the deal is aware of. Neither agency will say what it paid.
Some assume the compelled promoting mattered anyway. On CNBC, Jim Cramer argued it seemed like a clearing occasion that would mark a bottom for the AI trade.
The tape says one thing less complicated. Microsoft reported strong results on Wednesday night time and rose about 15%.
Chip shares jumped the subsequent day. One massive chip index rose 6.7% and snapped a five-day shedding streak.
One block commerce doesn’t transfer an entire chip index. An earnings report can.
Six days earlier than all of it, Aschenbrenner had informed his buyers so as to add cash.
“PS. At occasions we name out alternatives that appear like a very good time so as to add funds, if in case you have been ready for one,” Leopold Aschenbrenner, within the July 24 investor letter as reported by the Financial Times.
He acquired the course proper. He simply didn’t personal the shares anymore.
The fund will not be useless. It nonetheless holds non-public stakes, together with Anthropic, which filed confidential IPO paperwork on June 1.
Miners spent 10 years being known as a curiosity. It took one AI fund’s margin name to make them matter.
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