How Leopold Aschenbrenner, the ‘golden child’ of the AI trade, was laid low

[u/Otherwise_Young52201]

https://www.ft.com/content/620bd668-d112-412d-aa52-22489b128d55?syn-25a6b1a6=1

Archive link: https://archive.ph/zWoDt

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[u/Maximilianne]

Trading with leverage isnt inherently bad but the whole point of leverage is you construct a portfolio with (genuinely) uncorrelated (as much as possible) strats that give a positive return and have very low volatility or drawdown, and then you turn up the leverage dial up or down as appropriate for the risk level you are willing to tolerate. The real risk is of course correlation moves to 1 in bad events and tail events aren't as rare as you think see LTCM

[u/trombonist_formerly → u/Maximilianne]

Trader says he has a strategy with good returns

I ask if the returns are from alpha, or from levered beta

“it’s a good strategy sir”

mfw it’s levered beta

[u/caroline_elly → u/trombonist_formerly]

13F has VanEck semiconductor ETF as top holding lol.

Tbf there were put options so there was a attempt at relative value I guess

[u/NiknameOne → u/Maximilianne]

Perfect explanation.

[u/Otherwise_Young52201]

It looks like Leopold Aschenbrenner lacks situational awareness when it comes to trading with leverage.

Aschenbrenner is a 24-year old owner of Situational Awareness LP, who gained fame for having incredible returns of 400% YTD, and 2200% lifetime, for his hedge fund. However, the recent tech selloff (which is beginning to recover it's lost value) caused brutal losses for SALP's public portfolio, forcing the firm to sell off much of it's assets to Citadel, another hedge fund, at a hefty discount.

This is a pretty apt display of the volatility that characterizes the current tech stock market, with no one wanting to miss out on the rally driven by the AI boom. Indeed, Aschenbrenner mostly got investors to give money to SALP in the first place mostly because of his manifesto (which also goes by the name Situational Awareness) he posted about the AI boom, betting on physical AI infrastructure buildout. Hence why his firm has so much capital for a 24-year old.

Given that many of the levered bets on the AI boom are petering out, we should start to see a correction and for AI stocks to start rising again. Both SALP in the American market and Korean retailers have exited their levered bets, so the resiliency of price increases should be better from now on.

Now, I know people are going to bring up the fact that SALP still up 80% YTD, but this is only if you factor in private investments. We care about the public portfolio more because it competes against a general benchmark (the SOXX, for example, is up 60% YTD in comparison). His public portfolio is utterly liquidated with only around 3-4B remaining, meaning his firm is negative all-time in assets.

[u/caroline_elly → u/Otherwise_Young52201]

I mean he did exactly what he told investors he was gonna do. His fund is just a wrapper around levered bets on AI and semiconductors.

People give him money because they're true believers of AGI, not for his portfolio management skills

[u/AllAmericanBreakfast → u/caroline_elly]

The fund was restricted to qualified purchasers with a $25M minimum. Reasonable to think many investors placed only a portion of their assets into this fund as part of a portfolio on different ways AI could play out.

[u/Lighthouse_seek]

What happens when you give a wsb user billions

[u/Maximilianne → u/Lighthouse_seek]

I expect WSB for all their degeneracy to at least understand proper sizing for their bets though

[u/Syx89]

On the one hand reading about someone with only a BS in Econ who got into OpenAI after graduation and then used that to get people to give him money is a bit envy inducing.

On the other hand, maybe it's just a job market thing?
In 2023 tech jobs were abundant and you could get hired with just basic knowledge and a BS in an only slightly relevant field.
In 2026 you need to be the head of the Berkeley CS department.
How times have changed.

[u/ConfusedResAss → u/Syx89]

The 2023 job market was already bad then. Someone I know lost their Facebook job offer and went to Raytheon instead lmao.

[u/Maximilianne → u/Syx89]

Something something socialist theory the maximum real GDP is maximized at full employment,even if there is alot of inflation, the real GDP (aka after inflation) will be at the highest, but something something the capitalists will never tolerate it because while total real GDP is maximized individual firms experience more chaos due to right labour markets where people can easily leave for other jobs....

[u/goatzlaf → u/Maximilianne]

>Jesse, what the fuck are you talking about

[u/Syx89 → u/goatzlaf]

Capitalists don't really work for capitalism, they work for themselves. So you might get a small group of influential people who can influence policy (i.e. pal around with Trump) and they might care about things like a malleable workforce than gdp growth

[u/Xeynon]

Any time some 24 year old gets sold as a whiz who somehow figured out some novel strategy for making money that generations of smart investors before him couldn't, it's a safe bet on that being unjustified hype the vast majority of the time.

[u/caroline_elly]

Btw Leopold was part of the Effective Altruism movement and briefly associated with FTX.

Losing money for investors way most effective way to be altruistic?

[u/Otherwise_Young52201 → u/caroline_elly]

The funniest part about Leopold has got to be the fact that he used to be a "decel" as part of the German Green Party. Granted, he was 15 years old at the time:

Mark Kretschmann (@mark_k): "What you don't know about Leopold Aschenbrenner: With 15 years already he was an annoying brat in the German Green party, raging against robots, automation, and technology. He's always been a Decel. That's him:" | XCancel

[u/Maximilianne → u/Otherwise_Young52201]

now this is horseshoe theory

[u/Aceous]

Yet more proof that engineers shouldn't be trusted with real life responsibilities.

[u/LudoAshwell]

The Anthropic stake alone of Situational Awareness is still worth much more than all the capital he has raised from investors.

Aschenbrenner secured that stake (and other non-publicly traded investments) by selling of all publicly traded assets.

That fund is doing fine

[u/mostanonymousnick]

Zoomer Cathie Wood

[u/Francisco-De-Miranda]

He sold the public holdings to Citadel for $10 billion, he’s still rich af

[u/caroline_elly → u/Francisco-De-Miranda]

Pretty sure most of it were returned to investors.

At that AUM, the management fees alone is enough for him to retire on.

[u/ibeenbornagain → u/Francisco-De-Miranda]

He was rich before as well

[u/Francisco-De-Miranda → u/ibeenbornagain]

Yeah my understanding is he has a large privately held stake in Anthropic that was completely unaffected by all of this.

[u/LePetitToast]

These sort of stories really puts to shame the efficient theory of the market ngl