JPMorgan Cuts Ties with AI Hedge Fund After Heavy Losses
JPMorgan Chase has cut off lending to Situational Awareness, an AI-focused hedge fund founded by Leopold Aschenbrenner. The decision follows heavy losses on AI-related bets in July, when the fund lost roughly 67% of its assets.
According to regulatory filings, Situational Awareness' positioning shifted sharply from bearish put options against chip-sector names to a leveraged long book by the second quarter of 2026. The fund's public-market positions were then sold in bulk to Citadel as losses mounted.
The Securities and Exchange Commission has issued subpoenas to JPMorgan, Goldman Sachs, Citigroup, and Bank of America over the fund's leverage and margin calls. While the SEC's inquiry remains open, JPMorgan's own shares have shown little reaction to the news, with a 0.01% gain on September 11.
The episode highlights the risks associated with leveraged AI bets in a rapidly shifting market environment. The 10-year US Treasury yield has risen since the fund's July unwind, and the 2-year yield has narrowed its spread with the 10-year yield.