The Drama of AI Stock Rebound: A Showdown Between a 20-Year-Old Prodigy and a 50-Year-Old Veteran

A 20-year-old Leopold, a rising star from FTX and OpenAI
A 50-year-old Ken Griffin, a seasoned problem-solver on Wall Street
AI stocks block deals to prevent contagion, but selling pressure remains

Wall Street is a sea of survival of the fittest, teeming with sharks. The sharks are sensitive to the smell of blood. Even a slight drop of blood makes one a target.
The recent volatility of semiconductor and artificial intelligence (AI) stocks in the New York and Seoul markets resembles a suspense drama. The protagonists are a 20-year-old AI genius and a 50-year-old veteran from Wall Street.

Situational Awareness of Situational Awareness

Leopold Aschenbrenner received a call last Wednesday evening from London. There was a slight (?) problem with the hedge fund he founded, Situational Awareness.
The hedge fund held a significant number of publicly traded and private stocks in AI and semiconductors. Leopold maintained a 3-4 times leveraged position in some stocks like SanDisk. When the stock price plummeted, Goldman Sachs and JP Morgan demanded margin calls. If he couldn't quickly raise funds, he would have to sell precious private stocks like Anthropic that the fund owned.
At 24 years old, Leopold was in a dire situation, juggling preparations for a wedding in Carmel, a coastal city north of San Francisco, and the margin call issue that would determine the fate of his fund.
The caller was Ken Griffin, founder of Citadel, a hedge fund with $75 billion in assets. Although he was on a business trip in London, Griffin sensed blood in the water and immediately sprang into action. He had teams on standby in Chicago, New York, and Miami, engaging in overnight negotiations.
Griffin had a precise situational awareness of the situation. "You need money urgently. Sell the stocks at a low price." At 54, Griffin is adept at block deals, buying entire stock positions from funds on the verge of collapse.
When one hedge fund collapses, the Wall Street investment banks that lent money are forced to liquidate the stocks they hold as collateral, regardless of price. Other healthy stocks also drop. The collateral value decreases, and more stocks must be sold. The entire market shakes. The drop in SK Hynix ADR prices midweek was also due to rumors about Situational Awareness.
Somehow, contagion must be prevented. Griffin will once again help Leopold and earn praise. It goes without saying that he will make a huge profit.

A Life-Changing 24 Hours: Late-Night Negotiations Between San Francisco and London

Griffin called Leopold first, offering to help with funding. The two engaged in overnight negotiations on Wednesday. Another hedge fund, Millennium Management Global Investment, led by Israel Englander, also pursued a deal with Leopold.
The phone conferences between Griffin and Englander, crossing the Atlantic and the American continent, continued incessantly. Griffin set up a War Room composed of key executives, including Citadel's Chief Investment Officer, to persuade Leopold. They had to present terms that were even slightly better than Millennium's.
Just before the New York Stock Exchange opened on Thursday, Citadel struck a deal to acquire the publicly traded stocks of Situational Awareness at a 10% discount to market price. Rumors spread on Wall Street. The Wall Street Journal was preparing a report. The market reacted with prices.
Stocks related to semiconductors, which had plummeted, turned to a rising trend. The risk of being thrown out due to Situational Awareness had disappeared. SK Hynix ADR prices also rebounded. The sharks that had sensed blood scattered in search of other prey.
Situational Awareness successfully retreated to safety. With the contract with Citadel, key assets like Anthropic were preserved. Leopold was able to safely hold his wedding. The once-rising star, Leopold, was one of the AI geniuses who burst onto the scene two years ago.

The 20-Year-Old Prodigy and the 50-Year-Old Veteran

Leopold's nickname is 'Nostradamus of AI.' He accurately predicted the path AI would take. Originally from Germany, he entered Columbia University in the U.S. at 15 and graduated at the top of his class. He has a unique background, having worked at the fund of Sam Bankman-Fried, who created the digital asset exchange FTX. After FTX collapsed, he moved to OpenAI.
At OpenAI, he worked on the controversial Superalignment team. Speculation arose that this team played some role when Sam Altman was ousted from the board for creating dangerous AI. Leopold was eventually fired from OpenAI for leaking company information.
Two years ago, Leopold wrote a 160-page AI-related essay titled 'Situational Awareness.' This piece caused a tremendous sensation in Silicon Valley and Wall Street. The reason he founded his investment company was also due to this. The hedge fund's name is the same as the report's title.
Despite having no prior investment experience, money flowed into the hedge fund he created. It seemed that only a bright future lay ahead for the 20-year-old AI genius. That was until he received the call from Ken Griffin.
Ken Griffin is the founder of Citadel, one of the largest investment firms in the U.S. He began trading options in high school and continued to make money using financial mathematics while attending Harvard University. Griffin is known for his strong opinions. He is one of the few Wall Street figures who openly criticized President Trump's tariff policies.
Griffin is famous for making deals to acquire positions at bargain prices from funds in crisis. He has quickly intervened whenever major Wall Street firms like Amaranth, Sowood, Melvin Capital, and Enron faced collapse.
He is one of the most agile investors on Wall Street, providing what is known as 'Crisis Capital' to generate substantial profits. What will happen to Situational Awareness, which has received Griffin's helping hand?

A Race Against Time: The AI Rally in Griffin's Hands

Immediately after his essay became famous, Leopold established a hedge fund with his colleague Carl Shulman. Raising funds was not difficult. He received investments from the Collison brothers, founders of Stripe, executives from Meta AI, and Jane Street, among others. For some investors, the minimum investment unit reached $25 million.
This fund exploded in growth, riding the AI boom. By May of this year, it recorded a return of 270% after fees, and over 1000% since the fund's inception. Despite the current crisis, Situational Awareness still maintains a positive return.
It primarily focused on investing in high-quality AI-related stocks, utilizing high leverage and options investments, borrowing more than $3-4 for every $1 of capital. The position size was maximized. In a short period, it grew its assets under management to $45 billion, becoming a rising power on Wall Street.
In mid-July, the emergence of inexpensive open-source Chinese AI models shook investor sentiment regarding the AI rally, leading to a decline in tech stock prices. Situational Awareness failed to respond financially to this situation. Goldman Sachs and JP Morgan, which had lent substantial amounts of money to the fund, notified them of large-scale margin calls. Rumors circulated on Wall Street. Competitors focused their short-selling firepower on the stocks held by Situational Awareness.
Ultimately, the fund's asset value, which was $45 billion, plummeted by 67% in just a month, shrinking to around $10 billion.
Did the crisis end because Citadel took the valuable stocks? Citadel secured a significant safety margin as soon as the contract was announced. The stocks purchased at a 10% discount to Wednesday's closing price rose by more than 10% on Thursday. Hedge fund leverage investments are a race against time.
Stocks that are oversold relative to fundamentals will rise over time. If they have the stamina to withstand margin calls, they can fend off the shark pack's short-selling attacks. Leopold failed to defend, but Citadel is different. If they take their time to liquidate the stocks acquired cheaply, that will suffice. Now, the fate of AI-related stocks rests in Griffin's hands.

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