The "AI Stock God" wrote to investors: Experienced a "bank run" and will no longer use leverage; up 80% this year, we can make a comeback.

This hedge fund manager, regarded as the "God of AI Stocks," has publicly admitted his mistakes to investors and promised to rise from the ashes, after a forced liquidation triggered by a crash in AI stocks.

Leopold Aschenbrenner, founder of the hedge fund Situational Awareness, wrote to investors late Thursday, taking “full responsibility” for the fund's 67% asset plunge in July and pledging to learn from the “painfully expensive lesson.” He stated that the fund will continue to operate and will not exit the public equity market, but will no longer use bank borrowing to amplify bets in the future. Despite the severe hit, the fund has still posted a positive return of roughly 80% for the year.

Previously, facing margin calls from lenders, Situational Awareness urgently sold most of its stock positions to Citadel, owned by Ken Griffin, at a discount of over 10%. The fund's remaining asset portfolio (including private investments) is currently valued at about $10 billion.

The collapse of Situational Awareness began with the large-scale sell-off in AI stocks this week. The fund was heavily concentrated in stocks such as Bloom Energy and Sandisk, which are closely linked to the AI sector, and suffered massive damage amid the market turmoil.

According to The Wall Street Journal, as losses mounted, lenders issued consecutive margin calls, and the fund was forced to liquidate assets urgently. On Wednesday, the fund reached an agreement with Citadel to sell most of its public equity holdings at a discount of over 10%.

In his letter, Aschenbrenner likened the situation to a “bank run” and pointed out that the fund suffered unfavorable trading in “stocks we were publicly associated with.” He also partly blamed short sellers for deliberately targeting the fund's positions, further worsening the losses.

Reportedly, Situational Awareness had reached a preliminary agreement with a consortium led by Greenoaks and Sequoia Capital to sell $3.5 billion in private equity stake in the AI giant Anthropic. However, according to people familiar with the matter, the fund reversed its decision on Thursday morning and withdrew from the deal.

Since its inception roughly two years ago, Situational Awareness rapidly expanded its assets under management to over $20 billion, becoming one of the fastest-growing hedge funds in recent years.

The fund’s strategy was highly concentrated—betting capital on a small number of AI-related stocks and dramatically leveraging positions by borrowing from prime brokers. Aschenbrenner, who had no professional investment experience when he started the fund, gained wide attention in the market thanks to his in-depth understanding of the AI sector. He was dubbed the “AI Oracle” by some investors, and the fund’s trading activity was closely watched by outsiders.

In the first five months of this year, the fund surged approximately 270%. However, high leverage amplifies gains in favorable markets and magnifies losses in downtrends—the plunge in July was a direct manifestation of this logic.

In his letter to investors, Aschenbrenner stated he would completely remove all leverage from the investment portfolio and make this an unshakeable operational principle.

“These are exceptionally costly scars, but I am committed to ensuring they become invaluable experiences for both our organization and myself as we move forward,” he wrote. “My core commitment to you is that we will not waste the opportunity to learn from these events.”

He also reiterated his determination to keep fighting:

“Over the past two years, we have achieved remarkable results, despite occasional significant drawdowns. But our fund must always be structured to withstand losses and have the capacity to recover.”

Notably, the letter did not disclose the fund's latest assets under management. It is reported that many early investors are subject to lock-up periods and cannot redeem until at least September. A Situational Awareness spokesperson declined to comment.