🎰 He's Doing It Again

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Situational Awareness returned 439% in six months. Then it nearly died. Now it's buying again.

Leopold Aschenbrenner's AI hedge fund almost collapsed in late July. Six weeks later it's back in the options market, and not quietly.

CNBC's David Faber reported on Friday that the fund has bought "hundreds of millions of dollars worth of premium", citing people familiar with the matter.

That's premium. Not stock. Calls.

The positions went on last week and early this week, according to the report. The names are a straight bet that the AI buildout keeps buying things:

Every layer of the stack, in one basket. Subtlety is not the strategy.

Faber's read is that Aschenbrenner is going back to the exact trade that made him enormous money right up until it didn't.

Here's how enormous. From the start of the year through the end of June, the fund returned 439%, according to an investor letter reviewed by the WSJ. Put $100,000 in on 1 January and you're looking at $539,000 by the summer barbecue.

The catch was how he got there. The fund was said to be using substantial leverage to amplify those returns, which works beautifully in one direction and horribly in the other.

Late July was the other direction. AI and tech shares came under pressure, and Situational Awareness got caught with the borrowed money still on.

It ended up selling a large chunk of its public-equity portfolio to Ken Griffin's Citadel after steep losses. When you're offloading the book to Citadel mid-selloff, you are not negotiating from strength.

And this is a two-year-old firm. Founded roughly two years ago, it had already amassed more than $20 billion in assets. Aschenbrenner became a Silicon Valley name after his 2024 essay Situational Awareness argued AI would dramatically reshape society.

He raised twenty billion dollars on a blog post and a conviction. Then leverage did what leverage does.

Call options are a clock. You're paying premium for the right to be correct within a specific window, and if the move happens a month late the position expires worthless anyway.

So a fund buying hundreds of millions in premium is saying something sharper than "I like AI." It's saying the next leg happens soon.

Worth knowing, because that same conviction is what blew up in July.

The useful signal here isn't the stock list. It's the pace. One of the most aggressive AI bulls in the market got flattened seven weeks ago and has already re-entered at size, on borrowed time and with someone else's memory of the drawdown.

Does he know something? Or is this the guy doubling his blackjack bet after one bad hand?

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The US military just shot drones out of the sky with an actual laser.

Real deployment, near the Mexico border, against suspicious drones. First time it's ever been done.

Science fiction is now a line item in the defense budget.

This month the US Army handed out its first ever production contract for high-energy laser weapons, and AeroVironment $AVAV ( ▼ 0.24% ) won it.

Lockheed Martin $LMT ( ▼ 1.12% ) and nLight picked up contracts for the Joint Laser Weapon System, built to down drones and cruise missiles.

Boeing's $BA ( ▲ 2.76% ) Compact Laser Weapon System is already in the field with US Air Forces in Europe and Africa.

Navy boss Daryl Caudle put it in a memo with zero hedging: the argument over whether lasers work is finished, the only question left is how fast they get onto ships.

Israel beat everyone to it. Rafael's Iron Beam went to the IDF last year, the first high-power laser air defense system ever used in real combat.

This week US Space Command practiced "orbital dogfighting," flying satellites around each other in a simulated fight. Chinese satellites reportedly did the same thing back in 2024.

Yes, that's a dogfight where the planes cost half a billion quid and move at 17,000 mph.

Trump's Golden Dome stacks one space-based layer of sensors and interceptors on top of three land-based layers. First major test: second half of 2028.

Then the numbers get silly. The Space Force expects:

Goldman Sachs thinks the next big conflict involving the US and its allies probably extends into orbit.

The Space Force's own fix? Lean much harder on commercial space companies. The private sector is the supply chain now.

China showed off its humanoids at the World Humanoid Robot Games, and Reuters reports Beijing is now funding research into military uses with battlefield deployment as the eventual goal.

Worth being precise here: there's no evidence China has put an armed humanoid with an operational unit.

The US is testing humanoids too, but they're only allowed to handle weapons, not fire them. The Army also has a live contest running for humanoid tech with militarized capabilities.

Georgetown researcher Sam Bresnick's timeline for battlefield-ready humanoids: 5 to 10 years. So, somewhere between "soon" and "your kid's mortgage."

Defense budgets are quietly rotating from steel to electrons. Lasers, satellites and autonomy are where the new contracts are landing, and the winners aren't only the household names.

AeroVironment just won a category that didn't have a production line last year. nLight is a photonics company sitting next to Lockheed on a missile-defense contract.

And the Space Force openly saying it needs commercial partners is about as loud a demand signal as a government agency ever gives.

The 2028 Golden Dome test is the date to circle.

Saudi Arabia just shut the pipeline it built for exactly this emergency.

The East-West line is closed after drones from Iraqi militias hit it multiple times. Riyadh confirmed it Friday.

That pipeline runs 750 miles from the Gulf oilfields to the port of Yanbu on the Red Sea, and it can move up to 7M barrels a day.

It exists for one reason: to get crude out of the country if the Strait of Hormuz ever closes.

Iran closed Hormuz. Now the backup is closed too.

Here's how bad the timing is. That pipeline can carry more oil in a day than Saudi Arabia is currently producing.

The IEA said Friday the kingdom pumped 6M bbl/day in August, down from 8.3M in July and 9.4M on average last year. Lowest in more than three decades.

Earlier attacks this year took out a pumping station and about 700K bbl/day. Aramco had it fixed within days and everyone moved on.

This time the drones reportedly went after several pumping stations. Rather harder to patch over a weekend.

And at the other end of the Red Sea, Iran-backed Houthis just took an island in the Bab al-Mandeb strait plus a coastal town on the mainland, in a run of gains believed to have been guided by Iran's Revolutionary Guards.

Two chokepoints, both compromised. Reuters reports Saudi Arabia has asked the Trump administration for military help.

Forget the barrel price for a second. US diesel just went past $6 a gallon for the first time ever, helped along by Ukraine's strikes on Russian refineries.

Diesel moves trucks, trains, ships and tractors. When it climbs, the price of nearly everything else follows it up with a delay.

Wholesale ULSD futures jumped 9.2% this week to $4.9593/gal, Thursday's settlement the highest since April 2022. Gasoline futures added 2.9% to $3.3072/gal.

So energy is now driving the inflation story rather than reacting to it, which makes life awkward for anyone who was penciling in rate cuts.

What would change this view? Repair time. If Aramco pulls off another days-not-weeks fix, Friday's dip was the story. If those pumping stations stay dark while the Houthis sit on Bab al-Mandeb, $120 stops being a forecast and starts being a floor.

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