Situational Awareness, the hedge fund led by Leopold Aschenbrenner, has suffered significant losses in July, dropping approximately 67 percent amid a downturn in AI-related stocks, according to an investor letter reviewed on Thursday. The steep decline forced the firm to offload most of its equity holdings to Citadel, the investment firm owned by Ken Griffin, as it sought to raise cash to meet margin calls from lenders.

Earlier this week, Situational Awareness reached an agreement to sell $3.5 billion of its stake in Anthropic, a private artificial intelligence company, to a group of investors including Greenoaks and Sequoia Capital. However, the firm reportedly reversed course by Thursday morning and canceled the transaction.

Despite the losses in July, Situational Awareness remains profitable for the year, with net gains of around 80 percent, the letter states. Prior to July’s downturn, the fund had posted gains of approximately 270 percent through the end of May.

Aschenbrenner attributed some of the fund’s July losses to pressure from short sellers targeting its positions. He likened the experience to a bank run and revealed that the firm had eliminated all leverage from its portfolio in response.

Situational Awareness was founded about two years ago by Aschenbrenner, who had no prior professional investing experience. The hedge fund has grown rapidly, managing assets valued at more than $20 billion at its peak, driven largely by aggressive, leveraged bets on AI-related companies. Aschenbrenner’s reputation as an AI-focused investor has drawn considerable attention within Silicon Valley, with many watching the firm’s movements closely.

The fund continues to hold investments in private companies, including its stake in Anthropic. Reports indicate that Situational had sought to divest other privately held assets to bolster liquidity amid the recent market turbulence.

Situational Awareness’s recent volatility underscores the broader uncertainties and rapid shifts in the AI investment landscape, reflecting both the high stakes and significant risks associated with the burgeoning sector. Representatives of the firm did not immediately respond to requests for comment.