Situational Awareness hedge fund fell into a ditch
One of the hottest hedge funds in artificial intelligence received a bailout to stay afloat on Thursday amid a sudden drop in value for its investments.
The fast-moving crisis unfolded over just 36 hours at Situational Awareness, a once-envied investment firm in San Francisco led by 20-somethings, including a former employee of OpenAI. The firm put out an emergency call for help to rivals, seeking to sell more than $10 billion of its stock to shore up its plummeting portfolio, according to three people briefed on the call.
After a brief bidding war overnight, the hedge fund Citadel — founded by the billionaire Kenneth Griffin — agreed to step in with the needed cash, so long as it received a substantial discount on the investments, the three people said.
The move forestalled the immediate danger for Situational Awareness, but it has put many on Wall Street on edge. Several recent crises have begun with struggling hedge funds forced to unwind — most recently in 2021, when the collapse of Archegos, a family office that started as a hedge fund, ended up taking down the bank Credit Suisse along with it. [Continue reading…]
Situational awareness is crucial to understanding what’s happening with the hedge fund Situational Awareness — and the mid-20s wunderkind behind it.
Leopold Aschenbrenner is the man at the center of the high-profile hedge fund meltdown that’s dominating headlines and X feeds, after his once $20-billion-firm was forced to sell most of its public equity holdings to Citadel on Wednesday. Heralded as an AI savant, Aschenbrenner worked at, and was quite publicly fired from, OpenAI before founding his now flailing firm.
Aschenbrenner has stood out for his intellectual chops since he was a teenager. A German native with coiffed blonde hair, he arrived at Columbia University when he was only 15 and quickly joined the debate team, he told the school’s internal communications team. He co-founded an “effective altruism” group at Columbia, based on the same philosophical movement Sam Bankman-Fried championed. In 2021, Aschenbrenner graduated as the class valedictorian at the age of 19.
After graduating, Aschenbrenner joined OpenAI’s superalignment team in San Francisco, which works on ensuring that superintelligence acts in accordance with human values. OpenAI fired him in 2024 after the company said he improperly shared internal information with external researchers. Aschenbrenner denied OpenAI’s account on a podcast, saying that he did not disclose sensitive information and his firing was related to an internal memo about the company’s security measures. He said OpenAI’s human resources team issued a warning about the memo, and that he was fired shortly after.
In June of 2024, Aschenbrenner published a 165-page essay titled “Situational Awareness” that helped catapult him to prominence. He said AI will quickly transform the economy, as it demands gargantuan investments in computing power, semiconductors, memory, and energy infrastructure. He warned of “willful blindness,” of war with China, of the potential perils of superintelligence.
“Before long, the world will wake up. But right now, there are perhaps a few hundred people, most of them in San Francisco and the AI labs, that have situational awareness. Through whatever peculiar forces of fate, I have found myself amongst them,” Aschenbrenner wrote in the introduction to his essay. [Continue reading…]