JPMorgan ends prime brokerage lending to Aschenbrenner AI fund after historic losses: FT

JPMorgan Chase & Co (NYSE:JPM) has ended its prime brokerage lending relationship with Leopold Aschenbrenner’s hedge fund, Situational Awareness, after record-setting losses linked to a wider decline in artificial intelligence stocks, the Financial Times reported. The move by Wall Street’s largest bank removes a crucial source of leverage for the investor, who is in his mid-twenties, after his fund suffered the largest dollar loss in hedge fund industry history during a sharp July sell-off.

The pullback by major lenders underscores how quickly institutions have reassessed risk around aggressive AI-focused trading strategies that had previously produced record returns. Even after losing 67% of its assets in July, Situational Awareness avoided a total collapse by selling the bulk of its public market positions to Ken Griffin’s Citadel, leaving the fund up 80% for the year at the end of that month.

Aschenbrenner has turned to boutique prime broker Clear Street as he seeks to rebuild the portfolio and regain market access after top-tier investment banks stepped back, according to people familiar with the matter. Morgan Stanley held early talks with the fund after its launch, but the firm ultimately declined to establish a banking relationship, highlighting the heightened scrutiny facing highly leveraged technology vehicles.

In a letter to investors following the summer liquidation, Aschenbrenner pledged to reboot the hybrid public-private strategy while adopting a more conservative risk model that limits leverage exposure. The fund is now deploying customized “flex options” on semiconductor manufacturers including AMD, Intel, SK Hynix and SanDisk, alongside AI infrastructure providers like CoreWeave, enabling magnified equity exposure while capping potential downside to pre-paid premiums.

The shift to fully paid derivatives allows Situational Awareness to maintain sweeping directional bets across the technology supply chain without relying on traditional leverage facilities. As the fund attempts to regain its footing, market participants are closely monitoring whether its scaled-back capital structure can successfully navigate ongoing volatility across the broader artificial intelligence landscape.