Galaxy Digital (NASDAQ:GLXY) CEO Mike Novogratz called the implosion of Leopold Aschenbrenner’s Situational Awareness fund “the single greatest, most catastrophic hedge fund blowup of our careers,” while suggesting the forced selling may have marked a bottom for parts of the AI trade.
Speaking Monday on the All Things Markets podcast alongside Anthony Scaramucci, Novogratz blamed a combustible mix of leverage, concentrated positions and absent risk controls.
From $45 Billion to a Fire Sale
The fund, launched in July 2024 by the former OpenAI researcher, reportedly built a gross portfolio worth roughly $45 billion at its early-July peak.
Margin calls then forced it to sell the bulk of its leveraged public stock holdings to Ken Griffin’s Citadel, leaving the firm with assets estimated at around $10 billion.
The fund reportedly ran leverage of up to 400%, pairing long bets on AI infrastructure names like SK Hynix (OTC:HXSCL) and CoreWeave (NASDAQ:CRWV) with shorts against software stocks such as Adobe (NASDAQ:ADBE).
Both long and short sides of the trade moved against it in July.
“You can take leverage if you’ve got tight stops, or you can run no stops if you have no leverage, but you can’t have them both,” Novogratz said.
He said Aschenbrenner’s early thesis contained genuine insight. The more troubling signal was how quickly institutions handed the 24-year-old billions.
“What tells you that we’re in the bubble zone is … how fast institutional capital said, ‘Oh, give me some of that,'” Novogratz said.
Novogratz compared the scale with Long-Term Capital Management, which had roughly $4 billion in investor capital when it failed in 1998 despite far larger gross exposures, and invoked Charlie Munger’s line that smart people go broke through “liquor, ladies and leverage.”
Anthropic Stake Could Make Him ‘a Genius Again’
“You’d be an idiot to give a guy like that money as a leveraged portfolio manager,” Novogratz said. But Aschenbrenner may not need outside investors to rehabilitate his reputation.
Situational Awareness retained its private holdings, including an Anthropic stake Novogratz put at roughly $5 billion. “Anthropic could be a $3 trillion IPO,” he said. “All of a sudden that five billion is up to 25 billion, and he’s like a genius again.”
Polymarket traders currently price a 66% chance Anthropic lists by Dec. 31 and a 36% chance it debuts by the end of October. A separate market gives Anthropic just a 7% chance of debuting at a higher valuation than SpaceX.
Novogratz called the wreckage “a tradable bottom” for Korean equities and data center names, a view Scaramucci shared. With the forced seller gone, pressure on AI names may have eased.
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