Inside the $400 Million Bet That Followed the Most Catastrophic Hedge Fund Blowup of the Year

Leopold Aschenbrenner's AI-focused hedge fund Situational Awareness made headlines twice in the span of two weeks: first for a near-catastrophic collapse that wiped out two-thirds of its value, then for pouring $400 million into a year-old stealth startup aiming to take on chipmaking giant ASML.

Here is the full picture, sourced from the best available evidence.

The $400 Million Bet on a Stanford Chip Startup

In early August 2026, Situational Awareness invested an additional $400 million into Source Foundry, a stealth chip-manufacturing startup founded by Stanford alumni Abdulmalik Obaid and Joe Burg . Source Foundry is building next-generation semiconductor manufacturing equipment, tooling, and software designed to challenge Dutch lithography giant ASML . The startup was incorporated in California in July 2025 and is now valued at roughly $5 billion .

This fresh $400 million infusion builds on an earlier $100 million stake, bringing Situational Awareness's total position in Source Foundry to approximately $500 million . The Wall Street Journal reported the deal as the fund's "latest known private-company bet" after it sold off nearly all its public stock portfolio . The fund retained its private holdings — including Source Foundry and reportedly a stake in Anthropic — while unwinding its public equities . Sequoia Capital is also a backer of Source Foundry .

The Collapse: How a $45 Billion Fund Lost Two-Thirds of Its Value

What happened. In late July 2026, a sharp sell-off in AI and semiconductor stocks triggered massive losses at Situational Awareness, which was using heavy leverage — reported at up to 400% . The fund suffered a roughly 67% drawdown in a single month . Facing margin calls from prime brokers including Goldman Sachs and JPMorgan, the fund was forced to sell the bulk of its public stock portfolio .

Citadel stepped in. Ken Griffin's Citadel bought most of that public portfolio . Reuters reported the unwound holdings at about $16 billion . The sale cut the fund's assets under management from a peak of roughly $20–$45 billion — CNBC reported a $45 billion peak including leverage, while others cited roughly $20 billion in net AUM — down to about $10 billion . Bloomberg reported the AUM "slumped to about $10 billion" after the Citadel pact, down by more than half . The fund did not sell its private book, which includes its stake in Anthropic valued at approximately $5 billion .

Aschenbrenner's background. Aschenbrenner is a former OpenAI researcher in his mid-twenties with no prior professional trading experience . He founded Situational Awareness in 2024 after his viral essay series on artificial general intelligence, and the fund had posted spectacular returns — roughly 439% in one reported stretch — before the July 2026 blowup . CNBC described him as a "20-something manager" who built the fund rapidly on concentrated, leveraged AI bets — a strategy that worked spectacularly on the way up and collapsed when the AI trade reversed . He was fired from OpenAI in 2024 over an alleged information leak that he disputes .

What It Means

The $400 million investment in Source Foundry signals that Aschenbrenner is not retreating from his core thesis — that the bottleneck for AI progress is hardware, particularly chip manufacturing. The fund's willingness to deploy half a billion dollars into a private company without public-market liquidity suggests a long-term conviction that survives the public market blowup. Whether that conviction pays off will depend on whether Source Foundry can deliver on its promise to build machines that challenge ASML's dominance — a feat no company has achieved in decades.