**Situational Awareness, the AI-focused hedge fund led by former OpenAI researcher Leopold Aschenbrenner, faced a sharp July 2026 reversal after leveraged bets on semiconductors, data centers, and infrastructure unraveled amid a broad AI selloff.** Margin calls from prime brokers forced the sale of its entire ~$16 billion public-equity book to Citadel at a discount, shrinking assets from peaks near $45 billion to around $10 billion while preserving its multibillion-dollar Anthropic stake and other private holdings. Aschenbrenner accepted responsibility in investor letters, eliminated leverage, and committed to operating as a hybrid public-private vehicle, with subsequent deployments including a $400 million investment in chip startup Source Foundry. Traders assign low implied probability to a formal wind-down announcement by year-end, viewing the episode as a liquidity reset rather than terminal failure, though post-lockup redemptions and any regulatory scrutiny remain potential swing factors.