▶ Full Post Text
On 24 July, Leopold Aschenbrenner wrote to his investors that the AI sell-off had opened one of the best buying windows since early 2025, and invited them to add capital from 1 August. The FT saw the letter. Six days later his prime brokers sold his entire public equity book to Citadel.
I’ve spent the last day going through what’s actually knowable about this, and I think most of the coverage is drawing the wrong lesson. So here’s the thesis and the verdict up front, and then the part I think people are getting wrong.
What he owned.
Situational Awareness launched in July 2024 with roughly $225m from the Collison brothers, Nat Friedman and Daniel Gross. The thesis: if models keep scaling, someone has to build the chips, memory, data centers and power, and those builders are mispriced. So he was long the physical layer — Nebius, SanDisk, Micron, CoreWeave, Bloom Energy, IREN, Core Scientific, SK Hynix — and short the software names he expected AI to eat, including Adobe. He held 12.4m Nebius shares, a 5.6% stake.
It worked. The FT put H1 2026 at 439% net. The WSJ reported over 1,000% since inception.
The arithmetic.
Reported leverage was up to 400%. For every dollar of investor money, roughly four dollars of stock, three of them borrowed. Run it in reverse: the book only has to fall about 25% before the entire investor dollar is gone. In July, Nebius, SanDisk, Micron and CoreWeave each fell more than 35%. SK Hynix fell roughly 47% from its June peak. The SOX dropped over 20%. The Kospi lost about a third.
That’s the whole structure. There’s nothing more sophisticated going on.
The part that actually broke it. The software shorts were meant to be the airbag. Instead software rallied while AI infrastructure collapsed, so both legs lost at once. A hedged book stopped being hedged at the exact moment it was needed, which is the only moment a hedge is ever tested. Citadel bought the lot below market on 30 July.
The correction I’d make to most of the coverage. The headline everywhere is “$45bn to $10bn.” That is not $35bn of investor money destroyed. Most of that figure was borrowed. Borrowed money that disappears takes the lender’s exposure with it, not the investor’s, and no bank has disclosed a capital hole. The firm survives, keeps its private book including an Anthropic stake the FT valued around $5bn, and the WSJ reports the remaining positions carry no borrowing.
Compare Archegos, where nine lenders ate more than $10bn between them and Credit Suisse alone took $5.5bn. This has so far been contained. Also worth noting the outlets don’t agree on the peak number — $45bn, $24bn and $20bn have all run this week, because “assets” for a levered fund can mean equity or gross.
I don’t think this was a failure of analysis. His read on where AI capital would flow was better than most of the Street’s. What failed was the structure he used to hold it. A thesis that needs four times leverage to be worth holding isn’t a thesis, it’s a trade. If the AI build-out really is the decade’s great reallocation of capital, it pays unlevered investors over years and needs no borrowed money at all. His error wasn’t being early or wrong — it was building a position that had to be right continuously when he only needed to be right eventually.
The one thing I can’t settle: whether that 24 July letter was conviction, or a man trying to stop a run he could already see. The facts are settled and the meaning isn’t. I lean toward conviction.
I put the full write-up together with the side-by-side against Archegos, Amaranth and LTCM — including the detail that Citadel also bought Amaranth’s book in 2006.
I write one of these free every week. No pitch.