Aug 3, 2026
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Add us on GoogleLeopold Aschenbrenner, 25, was once hailed as the great German genius of AI trading.
Financial Times reported that this former OpenAI researcher delivered gains of 1,551% since opening his hedge fund Situational Awareness in 2024. Within the first six months of 2026, Situational Awareness was already up a staggering 439%.
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According to CNBC, Situational Awareness held $45 billion in assets at its peak, mostly in companies tied to the AI data center buildout. Bigwigs in tech like GitHub’s CEO Nat Friedman and Stripe’s co-founders Patrick and John Collison helped prop up Aschenbrenner’s growing empire.
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But even though Aschenbrenner made some great picks in the AI bull run, he was caught off guard by a nasty market correction.
Not only did the companies Aschenbrenner held take a nosedive, but he was also losing big on short positions in legacy software names like Adobe.
That would be disappointing, but not necessarily devastating, had it not been for one thing: Borrowing money. A report from MarketWatch suggested some of Aschenbrenner’s positions had as much as four times leverage, meaning prices moved up or down four times the asset’s market value.
When semiconductor stocks soared, Situational Awareness was basically printing billions in gains. However, once volatility returned to these high-flying names, the margin calls from brokers flooded in, putting Aschenbrenner on the brink of liquidation.
According to The New York Times, Aschenbrenner frantically phoned for support from Wall Street firms to raise cash ASAP. On July 30, Situational Awareness narrowly avoided destruction by inking a deal to sell $10 billion worth of its public stock to market maker Citadel.
In a letter to investors obtained by Financial Times, these events led to a 67% decline in Situational Awareness’s portfolio for July.
Aschenbrenner took “full responsibility” for these losses, telling investors, “These were very expensive scars, but I am dedicated to ensuring they will be invaluable lessons for our organization and for myself as we move forward.
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MoneyWise reached out to Situational Awareness for comment, but we didn’t hear back by the time of publication.
Margin trading mania in the AI era
Silicon Valley hedge funds aren’t the only ones borrowing wads of cash to speculate on AI stocks. In fact, recent data suggests retail traders have been increasingly using leverage to amp up their AI-related positions.
A report from Reuters showed just how pervasive leveraged trading has become in South Korea as local chipmakers Samsung and SK Hynix benefited from AI capex. On July 13, Goldman Sachs found that over 1.2 million retail traders in Korea who used leverage received margin calls, of which 320,000 to 360,000 lost all their money in liquidations. For perspective, that means margin calls went out to every one in 30 adults throughout Korea in just one day.
Overall, CNBC found that Korean investors have already put $9.4 billion into single-stock leveraged ETFs since May of this year.
The investment research firm Leuthold Group showed a similar appetite for high-risk margin trading with American investors. According to Leuthold Group’s analysts, absolute margin debt grew 54% over the past 12 months.
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“Boy wonder, no more” — Cramer’s take on Aschenbrenner’s implosion
CNBC’s Jim Cramer used Aschenbrenner’s demise as an opportunity to highlight the dangers of playing with margin.
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In a recent episode of Mad Money, Cramer summed up the “situation” at Situational Awareness as an inexperienced investor who “recklessly” borrowed funds without expecting a rainy day.
As Cramer explained it: “Aschenbrenner apparently didn’t believe that anything would ever go wrong that he did. He didn’t seem to realize that when stocks go down, and you’ve bought them with margin money, the brokers aren’t going to lose money on you. You either pay them, or they forcibly sell the stocks you bought with borrowed money.”
The takeaway Cramer wants his viewers to get from Aschenbrenner’s “flameout” is simple: “Get off margin.” He added, “This business is hard enough. You don’t need margin to make it all that much harder.”
On a positive note, now that Aschenbrenner’s influence on tech isn’t so strong, Cramer hopes “we can go back to analyzing stocks as pieces of the companies they represent” rather than over-leveraged positions in one hedge fund’s playbook.
Cramer also suggested looking into some “tremendous opportunities” to buy high-quality tech companies like Intel that got unfairly punished in this mess.
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Eric Esposito is a freelance contributor on MoneyWise who loves making financial topics accessible and understandable to readers. In addition to MoneyWise, Eric’s work can be found in publications such as WallStreetZen and CoinDesk.
