Situational Awareness’ prime brokers poised to maintain backing Leopold Aschenbrenner in wake of selloff: sources

Reports of the demise of the “Nostradamus of AI,” a.k.a. Leopold Aschenbrenner, might be exaggerated, On The Money has discovered.

Just ask his prime brokers.

That’s the phrase from the Wall Street banks that carry out this important operate for hedge funds – half of the same smart-money crowd caught off guard last week by Aschenbrenner’s tremendous one-month implosion when his leverage-fueled binge on artificial intelligence shares went south.

Leopol Aschenbrenner’s fund, Situational Awareness, appeared to crater in a single day. Linkedin/Leopold Aschenbrenner

It was the whipsaw for the ages: Aschenbrenner’s fund, Situational Awareness, appeared to crater in a single day: after recording a 1,000% return since its inception in 2024, it fell a whopping 67% in just a month and needed to unload billions of its holdings to remain afloat.

But as of this week, Achenbrenner’s child isn’t lifeless despite its nicely publicized days-long flame-out by which practically all its public holdings went to Citadel in a hearth sale. Yes, the fund is down to $10 billion in belongings from its high of $45 billion, however even along with his huge puke, he’s still up round 80% for the yr.

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And, keep in mind, $10 billion is still a respectable chunk of money, retaining him among the top 50 hedge funds in the nation, Wall Streeters inform me.

It’s why Achenbrenner’s prime brokers – the Wall Street corporations that are important for hedge funds to operate because they deal with so-called back-office wants – are still eager to stand behind him, sources inform On The Money.

My sources word, for instance, Aschenbrenner still has his $5 billion personal stake in Dario Amodei’s AI developer, Anthropic that has been getting ready to go public, and his fund has lock-ups that make it troublesome for big buyers like Jane Street to easily pull all their money.

Achenbrenner attained a cult following in the AI ecosystem after a messy exit from the company OpenAI when he penned  a widely read treatise on the rising technology. Getty Images/iStockphoto

For that motive some of the world’s most prestigious banks – JP Morgan, Goldman Sachs, Bank of America and Citigroup – haven’t yet cut off prime broker ties with the humbled Nostradamus of AI, I’m told. At Morgan Stanley, meanwhile, the prime brokerage people had deliberate to onboard Situational Awareness to their platform in September. As of publication, it has no plans to stop, my sources say.

Reps for these banks declined to remark, however wouldn’t deny their continued curiosity in Achenbrenner’s fund as prime brokers. A request for remark from Situational Awareness has not been answered.

Of course, what’s true today may not be the case tomorrow. Wall Street likes to make money nevertheless it always worries about reputational risk, significantly doing business with risk takers on steroids.

Major banks haven’t yet cut off prime broker ties with the humbled Nostradamus of AI. REUTERS

Plus, it’s unclear if exterior its current buyers, Aschenbrenner will have the ability to appeal to new money anytime soon. His story, which has been plastered across major media for the past week, will make that troublesome. This is, after all, a barely-out-of-college dude. He attained a cult following in the AI ecosystem after a messy exit from the company OpenAI when he penned  a widely read treatise on the rising technology.

He turned that movie star standing into an investment profession without any investing experience. His returns have been insane, however as soon as the news broke of his losses, people discovered out why: He juiced up his winnings by way of huge leverage – borrowing to finance his market gambles the same means that doomed all those banks back in 2008.

That said, Wall Street is stuffed with second acts: before Larry Fink grew to become the investment sage working money-management behemoth BlackRock, he famously misplaced his shirt as a trader at the outdated First Boston. That humbling experience turned him into one of the best risk managers in the business.

Aschenbrenner is clearly sensible (he graduated from Columbia at just 19 years of age) and equally humbled, so don’t rely him out. The sensible money on Wall Street isn’t, at the very least not yet.

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