How to Lose a Hedge Fund in 10 Days

Hi there,

The biggest AI investing name lost $30B last week after getting played by finance’s top dog, absolute cinema.

What I'm Seeing in AI

The Aschenbrenner Collapse

Leopold Aschenbrenner is the ex-OpenAI researcher who wrote Situational Awareness in 2024, a very memorable essay that claimed we’d reach AGI (super intelligent AI) by 2027.

He turned that essay into a hedge fund, on the thesis that the market wasn’t pricing in how rapidly AI was developing.

By the end of June, the fund was up 439% and managing about $45 billion USD.

In July it fell 67% (CNBC), losing 30 Billion dollars.

Here’s how it actually unravelled:

Leopold was running about 4x leverage (borrowing four dollars for every one of his own, so every gain, and every loss, is multiplied). On 27 July, Citadel Securities, Ken Griffin’s hedge fund, told the market to expect a surprise interest rate hike. Rate fear hits high-growth AI stocks hardest, and that’s exactly what Leopold was loaded up on.

The stocks fell, and his banks margin called him (when the value of what you bought with borrowed money drops, the bank asks for the difference that day, and if you can’t pay, they sell your positions for you). Goldman, JPMorgan and Bank of America all came knocking at once. He had to dump everything.

Two days later, the rate hike never came, and Ken Griffin’s hedge fund bought most of Leopold’s $16 billion book at a discount, off the back of rumours he had created himself. AI stocks rallied hard once the market knew the forced seller was gone. Chess.

AI x Finance

I’ve spent this year mostly working with finance clients, which has taken me deep into this world. I was glued to this story.

Watching someone turn a view about where AI goes next into a real position, and absolutely rake it in, seems like a fun game.

I’ve started going deep into how people chase alpha (beating the market rather than just riding it), since I spend all day thinking about the future with AI. We are even considering starting a fund to dabble in this world.

Leopold is 24, wrote a manifesto, and was handed $45 billion of other people’s money with no track record managing any of it. He got taken out by the borrowing, but the thesis is clearly directionally correct.

What I'm Building

A Chill AI Company 🤨

We had our first six figure month in July! With two founders and two teammates still at uni, this is pretty hype.

When we started, especially in the tech scene, ‘lifestyle business’ was an insult. To most people it meant you weren’t being ambitious. I think AI has killed that distinction, because the leverage that used to take thirty people and a funding round now sits on four laptops.

Our whole mission is giving people the fun part of their work back. It would be ironic to build the company in a way that takes it away from us.

We still work hard, and I honestly think this culture has led to many more creative ideas.

We’re looking for an Aussie-based marketing hire to help distribute this image, and to get what we’re building in front of more people. hiring page is here if ya know someone.

My AI Health Stack

For a little tangent, I’ve started managing my health with AI.

My watch, my food logging and my gym app all sync to an AI agent called Helf. It updates my training program and messages me every morning with advice for how hard to exercise and how long to sleep.

The most useful thing it does is prove me wrong.

I was sure walking more was good for my recovery. Two years of data says there’s no correlation: my steps climbed all year and my recovery stayed flat. The thing that moves it is stress before bed.

I also walked out of the gym when it texted me on Wednesday telling me to have a rest day, and I genuinely went from feeling crap that morning to full of energy the next.

What’s something you’d track about yourself if you had the data?

Also 100 reader edition 🥳, thanks for all the shares!

See you next Friday,

Finlay

Explore the rest of my writing here → finlayekins.com/writing

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