JPMorgan Cuts Financing for Situational Awareness
Sources confirmed to English media that JPMorgan has terminated financing for the hedge fund Situational Awareness, managed by Leopold Aschenbrenner, due to significant losses from AI-related bets. Goldman Sachs, Citigroup, and Bank of America remain its brokers, and the fund has begun engaging with boutique brokerage Clear Street. No immediate comments were available from the parties involved.
Founded in 2024 by former OpenAI researcher Aschenbrenner, the fund has a minimum subscription of about $25 million, with investors including JPMorgan, Goldman Sachs, Bank of America, and Stripe founders Patrick and John Collison. The fund used approximately four times leverage to bet on stocks related to Nvidia's supply chain, storage, computing power, and electricity, while shorting some software stocks. Peak assets ranged from about $20 billion to $45 billion, with leverage amplifying gains to approximately 439% before mid-year and over 1500% since inception.
In July, a global drop in chip stocks triggered margin calls. The fund's portfolio retraced about 67% that month, with Aschenbrenner writing in a letter to investors that it was "closer to an unacceptable permanent capital loss." Within about 30 hours, it handled about $16 billion to $20 billion in public stocks, but Millennium and Jane Street declined to take over the portfolio after review, leading Citadel to buy most of the positions at about a 10% discount before the market opened on July 30. Aschenbrenner finalized the deal in a call with Ken Griffin early in the morning. After the fire sale, remaining assets were about $8 billion to $10 billion, mostly in private equity like Anthropic, with valuations set by the fund itself.
On July 24, he still listed high returns in his letter, only to be urged by banks for margin payments. Both short software stocks and long computing power stocks faced losses simultaneously. Heavy positions in Nebius, SanDisk, CoreWeave, and SK Hynix retraced by several tens of percentage points. The fund claimed it did not miss margin call points but could not repay some loans from Goldman Sachs and others without liquidating positions.
In market mechanics, the seller is the must-de-leverage Situational Awareness, while the buyers are Citadel, which is acquiring discounted stocks, and other banks still collecting brokerage fees. This is a forced deleveraging driven by margin calls, not a fundamental repositioning. Funds are being withdrawn from bank balance sheets, and public positions are being sold at a discount to Citadel. Beneficiaries are the buyers acquiring at a discount and JPMorgan, which is tightening limits; under pressure are the funds still relying on leverage to turn AI narratives into profits, as well as the chip and computing power stocks that are being sold off alongside them.
Source: Public information
ABAB AI Insight
Aschenbrenner named the fund after a lengthy article predicting the timeline for AI, essentially using the narrative as a fundraising prospectus. Banks leveraged up to about four times during rising years based on dynamic margin requirements, profiting from financing interest; once chip stocks fell simultaneously, the same margin requirements reduced the fund from the $45 billion range to the single-digit billions. JPMorgan is not cutting off a viewpoint but rather stopping the lending of its balance sheet to this concentration. Goldman Sachs, Citigroup, and Bank of America retaining brokerage positions indicates that Wall Street is interested in fees, not in adding leverage to the same concentrated positions.
The capital path is "private equity stories plus public leverage." The Collison brothers and others locked funds into private valuations like Anthropic, while the public market side borrowed from banks to amplify Nebius, CoreWeave, and storage stocks. During rises, both sides validate each other; during declines, only public positions can be immediately priced and forcibly liquidated. Citadel stepping in at a discount acts as the last buyer, not a partner. Remaining positions are primarily in private equity, precisely because private equity cannot be margin-called temporarily.
Comparing to the concentrated tech longs before and after 2008 and the 2021 Archegos: both involve a few names, high leverage, and multiple banks simultaneously providing financing. Archegos left losses to brokers; this time, banks claim that dynamic margins have already reduced leverage during the rising phase, and the fund has not defaulted, but a 67% monthly retracement still forced an industry-wide sell-off. The industry's position has shifted from "the public trading vehicle for AI's inevitable success" to a rebuilding phase of "leaving private equity and rewriting risk models."
The structural change is a transfer of pricing power before regulation moves: from the narrative authority of fund managers to the margin formulas of brokers. The mechanism is that once the volatility of concentrated positions exceeds internal limits at banks, financing relationships can be unilaterally closed without bankruptcy. Those who can produce cash at a discount will acquire stocks pushed up by narratives; those who only possess stories and private valuations will lose the qualification for the next round of leverage.