Situational Awareness, the AI-focused hedge fund led by Leopold Aschenbrenner, is facing a severe downturn after a July slump in AI stocks wiped out billions in value. The U.S.

Securities and Exchange Commission is now reportedly subpoenaing banks that worked with the fund, asking them to preserve relevant documents.

While no wrongdoing has been alleged, the fund acknowledged the scrutiny as typical for high-profile firms and pledged full cooperation.

The episode underscores the fragility of AI-driven investment strategies and serves as a cautionary tale about the sector’s assumed unstoppable growth.