The Abrupt Fall of Situational Awareness Is a Warning Sign. So Is Nvidia’s Vendor Financing.

SubscribeSign in

The Abrupt Fall of Situational Awareness Is a Warning Sign. So Is Nvidia’s Vendor Financing.<br>Plus, a look inside Leading the Future & a Thinking Machines Lab co-founder defects back to OpenAI

Jonathan Weber and Madeline Renbarger<br>Jul 31, 2026<br>∙ Paid

Share

The Week in Short<br>Leopold Aschenbrenner’s AI-centric hedge fund sells its public holdings after a market rout, a warning flare for the increasingly leveraged AI industry. TBPN Host John Coogan talks tech media and life after OpenAI ownership on the podcast. SPVs outpace direct share listings as secondary market mechanisms. A Thinking Machines Lab co-founder steps down citing health issues, but quickly takes a job at OpenAI . The Trump administration bans Chinese robots. Google DeepMind’s AlphaFold team sees a personnel shakeup and a few notable departures . Live-shopping app Whatnot offers a sign of life for consumer dealmaking.

The Main Item<br>As Markets Wobble, Circular Financing & Leveraged Bets Ramp up the Risks

The rapid retreat of AI and chip stocks over the past couple of weeks has exposed the fragility of an AI funding boom that’s drawing capital from every corner of the financial system — and is increasingly reliant on debt.<br>Situational Awareness, the much-touted San Francisco hedge fund led by 25-year-old wunderkind Leopold Aschenbrenner , this week provided an object lesson in the risks. Less than two months ago, the former OpenAI researcher was being celebrated by the Wall Street Journal for his prescience in seeing the AI opportunity early and turning a few hundred million dollars into well over $20 billion in less than two years. (The firm’s net asset value reportedly reached $45 billion at its height.)<br>On Thursday, he was forced to sell the fund’s public stock portfolio to Citadel after margin calls had left it in a liquidity crisis.<br>The accelerationist-leaning pseudo-anonymous account @beffjezos called the incident a “huge hit for EA-adjacent rationalist former big lab alignment researcher kind” and many meme-d Citadel’s Ken Griffin into the grim reaper of speculative investing.

It’s not that Aschenbrenner’s bets were wrong, exactly: the infrastructure and chip plays at the heart of the portfolio, including names like SanDisk, SK Hynix and CoreWeave, are still trading far above where they were a year ago. He himself has always spoken of the AI build-out as a long-term opportunity.<br>But “conviction” in this case meant levering up the wagers with borrowed money, and thus declines on the order of 30% on core holdings created a sudden cash crisis. It’s a reminder of how quickly fortunes can turn in an AI trade where valuations — and thus expectations — remain sky high, and risk is often stacked upon risk.<br>A similar red flag in that regard comes in the form of the latest wave of multi-billion-dollar Nvidia investment deals. This week, it was a $5 billion commitment to Ilya Sutskever’s Safe Superintelligence, much of which will be used to buy Nvidia gear.<br>Nvidia is reported to be discussing a loan guarantee for OpenAI of as much as $250 billion, also tied to Nvidia hardware.<br>That’s on top of $90 billion in corporate VC investments over the last 16 months alone, per the Financial Times. Nvidia participated in 283 funding rounds between 2021 and 2025, with 85% of those investments in AI startups, according to Crunchbase.<br>The Bank of Jensen

In many cases, these investments involve Nvidia essentially providing the money for customers to buy its hardware. Indeed, CEO Jensen Huang has been so aggressive in funding the AI ecosystem that the company is functioning almost like a bank; with annual free cash flow nearing $100 billion and little debt, that isn’t obviously reckless.<br>Yet such vendor financing, though it has plenty of precedents, is what brought down Lucent and much of the rest of the telecom equipment industry in the early 2000s after the first dot-com bubble burst.<br>Nvidia’s defenders point out that many of its deals are collateralized by the hardware, so if the company fails Nvidia gets the gear back. In a bust scenario, though, those chips would be worth a fraction of their current value.<br>Huang has proven himself a tech CEO for the ages, and an AI visionary. He’s also been exceptionally good at turning that into money. But banking is a different business. And as Aschenbrenner just demonstrated, seeing around corners doesn’t always guarantee success.<br>Nvidia’s frenetic deal-making is just one of the ways in which the AI buildout has upended the traditional start-up financing playbook. As we noted last week, corporate venture investing has exploded in recent years, and accounted for almost 90% of all VC dollars that have gone into AI firms this year. That’s compared with less than 50% of VC dollars a decade ago.<br>New types of financial players are also making this cycle different.<br>From Wall Street to Jane Street

While hedge...