Explore the latest developments concerning Jim Cramer says.
Jim Cramer says this hedge fund's blowup reveals the hidden risks of leverage
CNBC's Jim Cramer said on Thursday that Situational Awareness' collapse is a cautionary tale about the dangers of investing with borrowed money.
"For two weeks, I've been telling you to get off margin, stop using borrowed money," the "Mad Money" host said. "I didn't want you to get caught up in what some over-leveraged hedge fund was doing. I didn't want you to get blown out."
The AI-focused hedge fund, founded by former OpenAI researcher Leopold Aschenbrenner, was forced to unwind its highly leveraged bets on Thursday after suffering steep losses in recent weeks. Situational Awareness embraced the popular "long hardware, short software" trade, betting on AI infrastructure companies such as Micron while shorting software stocks viewed as vulnerable to AI disruption.
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Meet the Gen Z AI whiz at the center of a hedge fund meltdown
Situational awareness is crucial to understanding what's happening with the hedge fund Situational Awareness — and the mid-20s wunderkind behind it.
Leopold Aschenbrenner is the man at the center of the high-profile hedge fund meltdown that's dominating headlines and X feeds, after his once $20-billion-firm was forced to sell most of its public equity holdings to Citadel on Wednesday. Heralded as an AI savant, Aschenbrenner worked at, and was quite publicly fired from, OpenAI before founding his now flailing firm.
Aschenbrenner has stood out for his intellectual chops since he was a teenager. A German native with coiffed blonde hair, he arrived at Columbia University when he was only 15 and quickly joined the debate team, he told the school's internal communications team. He co-founded an "effective altruism" group at Columbia, based on the same philosophical movement Sam Bankman-Fried championed. In 2021, Aschenbrenner graduated as the class valedictorian at the age of 19.
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