Cliff Asness is a very funny, very smart hedge fund manager whose firm, AQR Capital Management, has some $254 billion in assets. He has been in the investment business for over three decades. When I emailed Asness recently to get his thoughts about the disaster that befell Leopold Aschenbrenner’s hedge fund, Situational Awareness, which lost roughly $35 billion over the course of two weeks in late July, he replied: “For the future, let’s file the phrase ‘You never go full Kelly’ under the heading ‘Things of which you should be situationally aware.’ ”
On Wall Street, “going full Kelly” means constructing a portfolio that aims for the maximum possible return without the slightest regard for the potential risk of loss. And that is certainly how the 25-year-old Aschenbrenner appears to have operated his fund. He loaded up on AI-related stock—data center builders like CoreWeave and Nebius; chipmakers like Micron Technology and VanEck Semiconductor—while shorting software companies like Salesforce and Intuit, betting that they would fall. His thesis was that the artificial intelligence models emerging from OpenAI, Anthropic, and the other AI companies would soon obliterate the software and application companies. And to goose his returns he took on an enormous amount of debt to buy stocks. Rarely has the phrase “hedge fund” been such a misnomer; this was the opposite of a hedge.
And for a while he looked like a genius, which is often the case when a fund manager goes full Kelly with a concentrated portfolio of hot stocks. In June, The Wall Street Journal breathlessly reported that the Situational Awareness fund was up 1,000 percent in the two years since it opened, including 270 percent in the first five months of 2026.
Aschenbrenner’s fund had emerged from a 165-page paper he had written in 2024 in which he had predicted that the AI revolution was coming much sooner than most people anticipated—and in this, he turned out to be right. The podcaster Tim Ferriss went so far as to call Aschenbrenner the “Nostradamus of AI” who was “as close to clairvoyant as you could possibly be.” Investors pored over his SEC filings, seeking to buy whatever he was buying. His early investors included some of the leading lights of the tech world, including Patrick and John Collison, the co-founders of Stripe, and Daniel Gross, who is heading up Meta’s AI efforts. At its peak, the fund held $45 billion in assets, according to CNBC, an astonishing number given Aschenbrenner’s age and lack of investing experience.
And then, seemingly in the blink of an eye, it came crashing down. In the span of two weeks, mid- to late July, the AI stocks he favored all fell hard, most of them down over 30 percent, while the software firms he had shorted were all up by a similar amount. Meanwhile, the debt Aschenbrenner had taken on came back to bite him.
