Inside the Collapse of the 'AI Stock God' Fund: Situational's Heavy Bets on Micron and SanDisk Before Leverage Blowup

Recently, Situational Awareness, an artificial intelligence (AI) hedge fund founded by Leopold Aschenbrenner, known as the 'AI stock god,' shook financial markets due to losses from leveraged trading. Notably, the latest regulatory filings reveal that the fund continued aggressively increasing its positions in semiconductor stocks—especially memory chip makers Micron Technology (MU-US) and SanDisk (SNDKV-US)—right before its collapse.

Regulatory filings show that in the second quarter of this year, Situational Awareness significantly increased its holdings in Micron and SanDisk, with the combined position totaling approximately $11 billion, accounting for about a quarter of the fund’s net assets at the time.

At the same time, the fund reduced its short option positions in NVIDIA (NVDA-US), Broadcom (AVGO-US), and Advanced Micro Devices (AMD-US).

Analysts indicate this move reflects the fund’s management team holding a more optimistic outlook on the semiconductor sector overall, actively reducing hedging exposure and further increasing net long exposure.

However, this strategy quickly faced a market reversal. Last month, AI-related stocks were hit by severe sell-offs, with Micron’s share price plunging 29% and SanDisk’s dropping even more sharply by 47%, causing Situational Awareness’s tech stock portfolio to shrink rapidly.

Under the dual pressure of high leverage and concentrated holdings, Situational Awareness was forced to sell publicly traded stocks to meet liquidity demands. Ultimately, Citadel, the hedge fund financial services firm led by Ken Griffin, took over a large portion of the fund’s AI-related stock positions.

Founded by former OpenAI researcher Leopold Aschenbrenner, Situational Awareness primarily bet on the development of AI infrastructure.

For Situational Awareness, the strategy of heavily concentrating on a few individual stocks rapidly amplified losses when the market reversed.

The approximately $11 billion position in Micron and SanDisk was concentrated in just two companies. When share prices plummeted, the fund’s net asset value came under severe pressure, making it difficult to adjust holdings to alleviate liquidity issues. Ultimately, the fund had no choice but to sell off publicly traded stocks.

On the other hand, Citadel’s flagship fund, Wellington, saw a significant performance improvement in July, rising 5.9% that month. The main reason was Citadel’s acquisition of a large volume of public stocks held by Situational Awareness at about a 10% discount to market price.

Notably, before this transaction took place in the last week of July, Wellington’s monthly gain was only about 0.45%, indicating that the discounted acquisition quickly translated into improved fund performance.