Troubles at Situational Awareness Point to Record Stock Market Leverage
A meltdown at Situational Awareness, an A.I.-focused investment firm, is raising tough questions about the Wall Street banks that lent billions to the upstart firm.
TL;DR
- Situational Awareness, an eight-person hedge fund, was led by a 24-year-old with no prior trading experience.
- Despite red flags, major banks like Goldman Sachs and Bank of America lent the fund tens of billions of dollars.
- The fund made a large bet on artificial intelligence stocks, which experienced significant declines.
- The near collapse of Situational Awareness exposed the risks of banks lending lavishly to large investors.
- Leverage in the stock market has reached its highest point in over a decade, with hedge funds borrowing nearly $3.7 trillion from banks as of midyear.