After a 67% plunge, a comeback! AI investment star Aschenbrenner returns to the market, betting on SK Hynix, AMD, and others

The hedge fund Situational Awareness, which rose to prominence during the AI boom, is rebuilding its portfolio through new prime broker relationships after suffering the largest single loss in hedge fund history this summer, with its investments still focused on the technology and AI sectors.

According to reports citing sources on Friday, Leopold Aschenbrenner’s hedge fund Situational Awareness has returned to the options market, accumulating hundreds of millions of dollars worth of options from late last week into early this week.

Meanwhile, Situational Awareness has established a partnership with the specialist broker Clear Street, using this as a pivot to reconstruct its aggressive tech stock portfolio.

In July this year, Aschenbrenner’s fund assets shrank by 67% in a single month due to a major downturn in the AI sector, reportedly setting a record for losses in the hedge fund industry. At the time, Situational Awareness was able to narrowly avoid collapse by selling most of its public market positions to Ken Griffin’s Citadel.

The rebuilt positions involve core companies in the semiconductor and AI infrastructure sectors, including SK Hynix, SanDisk, AMD, Bloom Energy, and Oracle. Whether Aschenbrenner has secured new capital for public market investments remains unclear.

Situational Awareness became well-known during the AI boom, and Aschenbrenner was ranked among the most notable tech investors in the field.

However, this summer’s sharp correction in the AI sector put the fund at risk—according to reports, the fund lost tens of billions of dollars, ultimately forcing it to significantly reduce leverage and liquidate a large number of holdings.

To survive the crisis, Situational Awareness sold most of its public market positions to Citadel, a move which allowed the fund to continue but also marked a temporary end to its previous aggressive strategies.

In a late July letter to investors, Aschenbrenner stated he would "fight another day" and promised to "learn the necessary lessons." He also told investors that despite the severe setback, the fund was still up about 80% for the year. He added that the fund would "continue to operate in a hybrid public-private format," but public market investments would be "managed on a fully paid basis."

The strategy for rebuilding positions this time differs from its previous aggressive approach. According to sources, Situational Awareness has recently been making extensive use of so-called "flex options"—highly customizable derivative contracts that can only be executed through large prime brokers.

The use of fully paid options means that the fund’s maximum loss is limited to the option premium paid and will not face further losses due to margin calls. This approach is more conservative in terms of risk exposure than the extensive use of leverage seen previously.

Several prime brokers that have had contact with Situational Awareness revealed that Aschenbrenner has made it clear he intends to significantly reduce leverage as he restarts the fund. However, through the built-in leverage characteristics of options contracts, he can still maintain an amplified exposure to potential gains on his core positions.

In terms of broker resources, Situational Awareness is beginning to expand its network of partnerships.

Sources say the fund has recently begun working with Clear Street—a broker known for its focus on tech sector clients in the hedge fund world, though much smaller in scale compared to giants like Goldman Sachs, JPMorgan, and Citigroup, which Situational Awareness has previously worked with.

Hedge funds typically rely on prime brokers to execute customized derivative trades and provide financing support, and flex options inherently require execution through large brokers. The partnership with Clear Street is seen by observers as an important step for Aschenbrenner in rebuilding his Wall Street network.