JPMorgan curbed lending to Situational Awareness after AI losses, source says

Sept 11 — JPMorgan Chase cut off lending activity for Leopold Aschenbrenner's hedge ​fund Situational Awareness after large losses tied to his AI bets led to a near-collapse, a source familiar with the matter told Reuters on ‌Friday.

The AI-focused hedge fund liquidated most of its public equity holdings to Citadel after a global chip-stock ⁠rout exposed its leveraged bets to ​steep losses.

Aschenbrenner, a former OpenAI researcher who ⁠launched Situational Awareness in 2024, rose to prominence with lofty bets on companies ‌in the AI ecosystem ‌and eye-popping returns.

JPMorgan, one of the fund's key lenders, notified Situational that ⁠it would end its lending relationship after ⁠the losses, the source said.

Other Wall Street banks, including Goldman Sachs, Citigroup and Bank of America, remain active brokers for the company. It has also recently started working with Clear Street, a New York-based brokerage firm.

BofA, JPMorgan, Goldman Sachs and Citi declined to comment, while Situational Awareness did not immediately respond ‌to Reuters' requests for comment.

The Financial Times first reported ​the news.

PORTFOLIO SHOCK

Hedge funds typically borrow capital to magnify their returns, but concentrated trades can quickly turn south in volatile markets and boost exposure to losses.

In July, a broad selloff in global chip stocks triggered a margin call at the fund, adding pressure to either raise fresh capital from investors or offload its entire book. The portfolio's value had dropped 67% in July alone, ​Situational told investors last month.

At the time, Aschenbrenner, who is in his mid-twenties, told investors ‌the fund had ‌come "closer to permanent ⁠capital impairment than is acceptable to us," adding the fund remained optimistic about the fundamentals of the portfolio.

The steep losses also drew attention from the securities regulator last month. Reuters reported that the U.S. Securities and Exchange Commission had sent subpoenas ‌to Wall Street banks working ​with Situational Awareness to seek information about the ‌fund's trades and use ⁠of leverage.

(Reporting by ​Anirban Sen in New York and Utkarsh Shetti in Bengaluru; Editing by Shailesh Kuber and ​Alan Barona)

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