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Situational Awareness: The Full Story of Leopold's Collapse · In the Loop AI

0:00
Josh: I can't believe we're filming this episode. The poster child of Silicon Valley
0:03
Josh: investing, Leopold Aschenbrenner, has kind of been dethroned.
0:07
Josh: Like the dude got wrecked.
0:08
Josh: As to set some context, 20 days ago, there's this kid in mid-20s,
0:11
Josh: Leopold Aschenbrenner, we filmed many episodes about him. He was running the
0:14
Josh: best performing hedge fund on earth. It was up 1,600%. He ran it up from a few
0:18
Josh: hundred million dollars to $45 billion.
0:22
Josh: And then the market learned two things. One, that he was on leverage and two,
0:26
Josh: that he was getting closer to his liquidation prices.
0:28
Josh: So what does the market do? It hunted those positions and got him liquidated
0:32
Josh: only for one man to come in and swoop up the entire position of his fund in
0:37
Josh: one single transaction. And now, as I understand it, Ejaz, every single one
0:41
Josh: of his public positions is closed.
0:43
Ejaaz: It's gone. That's it. It is gone. It's gone.
0:45
Josh: Overnight, it happened so fast. This is unbelievable.
0:48
Ejaaz: Yeah. And I think it's important to kind of like set some context.
0:52
Ejaaz: Who on earth is this guy and like how all of this unravel? We're going to get
0:55
Ejaaz: into all of that on this show. But on your point of leverage,
0:58
Ejaaz: Josh, like it wasn't just like any amount of leverage. This guy was 4X levered on the entire font.
1:04
Ejaaz: 4X is crazy. So the nominal value that he was levered at was $100 billion.
1:09
Ejaaz: Do you know how much money you need to borrow to be levered to $100 billion
1:13
Ejaaz: on like a $45 billion book? It is just absolutely insane.
1:17
Josh: A lot more than it should have been.
1:18
Ejaaz: Way more, way more than he should have been. Okay, so who on earth is Leopold
1:22
Ejaaz: Ashenbrand? I'm sure you've heard this name, but just a brief kind of recap.
1:25
Ejaaz: Leopold Ashenbrenner was the wee age of 23 years old, so this was two years
1:29
Ejaaz: ago in 2024, when he left or rather got fired from OpenAI on the Super Alignment AI research team.
1:36
Ejaaz: And he decided to write a 165-page essay on what he thought the next decade
1:41
Ejaaz: of AI is going to look like.
1:43
Ejaaz: And turns out he's the only guy that was bang on with every single one of his predictions.
1:48
Ejaaz: And people love the essay so much that he raised a fund, a small amount of around $225 million.
1:54
Ejaaz: And over the course of two years, he rode that up 1,600% to the tune of $45 billion.
2:02
Ejaaz: Now, it is one of the most impressive runs of any investor.
2:05
Ejaaz: But the fact that he did it at the age that he had with no, zero trading experience,
2:09
Ejaaz: by the way, is just phenomenal.
2:11
Ejaaz: And the fund was based on two main pieces. Number one, that the physical AI
2:16
Ejaaz: infrastructure was going to be one of the best investment opportunities out
2:20
Ejaaz: there. Compute, GPUs, memory, all those kinds of things.
2:23
Ejaaz: He was very early on the trade. He called the trend very early. The second thesis is,
2:28
Ejaaz: applications, software, he was going to be short. He didn't believe that companies
2:33
Ejaaz: like Microsoft or whatever, their software was going to be worth anything in
2:37
Ejaaz: a world where AI models can just absorb all of those things. That was the sure bet.
2:42
Ejaaz: But things started to unwind around six weeks ago when his thesis that held
2:46
Ejaaz: strong for two years started to waver. Markets started to recede.
2:51
Ejaaz: There was the global war that was happening. There was a few kind of like oversupplies
2:54
Ejaaz: happening in terms of funding.
2:56
Ejaaz: And things started to go a little wry.
2:59
Josh: Yeah, it was it was messy. I'd say it took about 20 days to go from like absolute
3:03
Josh: legend to fully liquidated. It was like this happened very rapidly.
3:08
Josh: And it was kind of marked in a way by that July 10th ringing of the bell of SK Hynix.
3:14
Josh: This was like this huge IPO moment where everyone was very excited.
3:17
Josh: And it very much marked that top tick in terms of where the market was for Leopold in particular.
3:24
Josh: So that was early July. You can think like July 10th is when it started.
3:27
Josh: We're now sitting here August 3rd recording this. You'll be listening to this August 4th.
3:31
Josh: In this month, a lot kind of happened. And it starts with the memory trade.
3:35
Josh: We know Leopold is very risk-on with the memory trade, so much so that he was
3:38
Josh: using, like you mentioned, four times leverage.
3:40
Josh: And just a brief explainer for those who don't understand leverage.
3:43
Josh: At four times leverage, a roughly 17% move against your portfolio erases about
3:49
Josh: two-thirds of the equity.
3:51
Josh: So for every $1 you put down of money, you borrow three more.
3:55
Ejaaz: You control $4 of stock. If you're down like 25%, I think he wipes the entire
3:59
Ejaaz: book. Like you're done. It's just a 25% move.
4:01
Josh: Exactly, 25%. But the problem with this is that the people who are loaning you
4:05
Josh: money don't want to lose the book.
4:06
Josh: So they're going to start to claw back that equity prior to it reaching zero.
4:11
Josh: And that's when you see this cascading liquidation of events. And this was caused...
4:15
Josh: Initially by the market sell-off in memory and then it just went a little bit
4:19
Josh: further and faster from there uh you'll notice that there was this entity that
4:24
Josh: goes by the name of citadel that did flag earlier in the week
4:27
Josh: that hey we think interest rates might actually increase
4:30
Josh: and what does that mean for the market it adds further selling pressure so there was all this pressure
4:35
Josh: downward on his positions and because he was leveraged it creates a lot more
4:39
Josh: pressure on those positions and it required him to raise more money so in early
4:43
Josh: july around this time there were rumors that Leopold was looking to raise a
4:46
Josh: little bit more money for the fund.
4:47
Josh: I'm not sure if he actually got there, but basically July 24th comes,
4:52
Josh: he writes a letter to his investors admitting the damage.
4:55
Josh: Word gets out that he has been damaged. Those rivals press his known positions.
5:00
Josh: The brokers that he loaned his money from, they want cash. And then by July 30th,
5:05
Josh: the whole book sells in one single block and he's fully out of the market and
5:09
Josh: that's what happens and it was really this like unbelievably devastating thing
5:12
Josh: i would imagine for the fund
5:13
Josh: um because it just happened seemingly out of nowhere and everyone went from
5:16
Josh: like oh my god this guy's a genius to oh my god wait he just lost all of his
5:20
Josh: money well perhaps not all of it but a lot of the portfolio got wiped out.
5:23
Ejaaz: Absolutely josh um i feel like this timeline could play in a movie like the
5:28
Ejaaz: social network or something like that so i'm gonna spend crazier
5:32
Josh: It is nuts.
5:33
Ejaaz: Like I saw this entire thing unravel on my timeline, right, in real time.
5:37
Ejaaz: And so I'm going to share some of the tweets that kind of, I'm going to take
5:39
Ejaaz: you guys through this journey and run you guys through this entire timeline.
5:43
Ejaaz: So the original tweet that went viral was news broken from the Financial Times.
5:48
Ejaaz: And the title is a little demeaning. It's Leopold Ashenbrenner's situational
5:51
Ejaaz: awareness seeks to raise capital after the AI route. Now, that was the,
5:55
Ejaaz: I think it was the start of July that you just referenced, Josh,
5:58
Ejaaz: where it was like, okay, things are getting a little weird.
6:02
Ejaaz: And I watched the Martin Shkreli interview on TBPN.
6:06
Ejaaz: And he basically said he got approached by someone like a random intermediary
6:10
Ejaaz: saying, hey, do you want to buy $100 million of Anthropic shares at a really steep discount?
6:15
Ejaaz: And he just kind of like sat back in his chair and he was like,
6:18
Ejaaz: is this Leopold? Because there's no other fund out there that would,
6:22
Ejaaz: you know, do this in their right mind.
6:24
Ejaaz: And then from Martin Shkreli himself, he goes, I have a hearing rumors that
6:29
Ejaaz: SALP, which is Situational Awareness LP fund, is down more than 50% month to date.
6:34
Ejaaz: After it was being up around 200%. Now, the reality is even worse.
6:38
Ejaaz: It was down more. It was down 67% according to Leopold's letter at that time,
6:43
Ejaaz: but it wasn't publicly released back then.
6:46
Ejaaz: And the sad news is month over month, or rather year to date,
6:49
Ejaaz: he was up 440%. So like, you know, all of this came kind of like after the fact.
6:54
Ejaaz: So we're kind of like seeing a lot of these like news bits break,
6:58
Ejaaz: like people are like, okay, do I think that this like fund maybe potentially broke off.
7:03
Ejaaz: And then the news came that you just referenced, Josh, which is Leopold sold
7:08
Ejaaz: his entire public equity book that was levered to this man called Ken Griffin.
7:14
Ejaaz: Ken Griffin is CEO of Citadel. Now Citadel, they've been in this game for a
7:19
Ejaaz: while. They are market makers. They're one of the biggest market makers in the world.
7:22
Ejaaz: And they are known for managing risk expertly, such that they give compounded,
7:27
Ejaaz: very heightened gains every single year.
7:30
Ejaaz: And Citadel was the one that Situational Wellness or Leopold approached when
7:34
Ejaaz: they were in this time of need, when their leverage was working against them
7:37
Ejaaz: and said, Ken, I need to save this fund. I need you to help me out of this very sticky position.
7:43
Ejaaz: So Ken's team worked with him for six hours into the early hours of the morning
7:48
Ejaaz: before market open on Monday last week and said, okay, you can sell me this
7:52
Ejaaz: book at 40 to 80 on the dollar.
7:56
Ejaaz: And Leopold agreed. Monday market open.
7:59
Ejaaz: Remember that relief rally? Did you see those stocks? Did you see those stocks?
8:03
Ejaaz: There was a lot of green. It was nice to see a lot of green.
8:05
Josh: They were up like 20% apiece.
8:07
Ejaaz: Insane. So the memory stocks that had been beaten down over the last month were up like 20 to 25%.
8:13
Ejaaz: Guess how much Ken made in a couple of hours just by buying Leo's book?
8:17
Josh: Many billions of dollars.
8:18
Ejaaz: Yes. He made four to six billion dollars. That's unbelievable.
8:22
Ejaaz: Rumors that were stated are true. So a very interesting thing.
8:25
Ejaaz: But Ken, of course, he's a pro at this game. and he was already working against
8:29
Ejaaz: Leo before this happened.
8:30
Ejaaz: If you remember that Ken was pushing for interest rates to get like even worse,
8:36
Ejaaz: even though he probably knew what the outcome was, just to stoke fear in the
8:40
Ejaaz: market and dump the markets even more.
8:42
Ejaaz: So people became aware that Leopold's fund was in trouble because of the recent decline.
8:47
Ejaaz: And like you said earlier, they all piled in. They basically all wanted to short
8:52
Ejaaz: the position, push the stock down even more so that they can liquidate the guy
8:56
Ejaaz: and get it at a better price. And that's exactly what Ken Griffin did.
8:59
Josh: This is like an episode of Billions, if anyone's watched the show.
9:02
Josh: Like Bobby Axelrod is Ken Griffin. And you saw this predatory selling happening in real time.
9:08
Josh: And that's when the market knows that there's this giant fund wounded.
9:11
Josh: And it also knows the positions.
9:13
Josh: If you realize, I mean, every single quarter, we talk about the 13F filing.
9:17
Josh: That shows the positions of the fund. It knows whether to sell or short.
9:22
Josh: Those names and then force it out and then buy it back cheaper.
9:25
Josh: So people were able to actually target specifically the positions that Leopold
9:28
Josh: held in order to push those liquidation rates down higher, down faster,
9:33
Josh: and force him to sell all this thing.
9:34
Josh: And then the lenders call. I know his prime brokers, who are the people that lend him all the money.
9:39
Josh: These are companies that you know, like Bank of America, Goldman Sachs, JP Morgan.
9:43
Josh: They call him up and they say, hey, those stocks that we loaned you,
9:46
Josh: they're down a lot. We're going to need that money back right now. So he has to sell it.
9:50
Josh: And on top of that, the rate hike thing is so funny because you have to imagine
9:54
Josh: Citadel is playing this game.
9:56
Josh: They were targeting the positions that Leopold had to sell them, to push the price down.
10:00
Josh: And then adding the rumor on that these interest rates are going to be increasing,
10:04
Josh: that crushes the market even more. It's like, oh man, that's so brutal.
10:07
Josh: Only to buy it back at the absolute bottom and run it up from what?
10:12
Josh: He made it up like five, six, seven billion dollars in a single day.
10:15
Josh: So I'd love to hear the behind the scenes of how all this happened.
10:18
Josh: I think that's probably really funny.
10:19
Josh: But if we look at this book before and after now, we can kind of digest the
10:23
Josh: carnage and see where he stands now. Like what is the situation awareness fund look like?
10:28
Josh: Well, it turns out that almost all the public positions were gone.
10:32
Josh: There still seems to be a few small ones, but the main survivor is the anthropic shares.
10:37
Josh: Funny enough, it sounds like they still have about five billion dollars in Anthropic
10:42
Josh: shares. So now the Situational Awareness Fund has become a holding company for Anthropic.
10:46
Ejaaz: Is that right? Is this a venture fund? It's a venture fund right now.
10:53
Ejaaz: Martin Shkreli had this crazy take on CBPN where he basically goes,
10:58
Ejaaz: yeah, when you see a hedge fund starting to invest in VC deals, it is the death knell.
11:02
Ejaaz: And literally a month later, like Leopold's fund like blows up.
11:06
Ejaaz: But yeah, to kind of give you the state of the situation right now for Leopold.
11:11
Ejaaz: His public book is pretty much entirely erased. He has a few positions open,
11:15
Ejaaz: and they're completely unlevered, and they're going to be unlevered for the foreseeable future.
11:19
Ejaaz: So it's spot only, long only. And then, yeah, the Anthropic shares is actually
11:24
Ejaaz: what ended up saving the fund.
11:26
Ejaaz: So this is a unique twist. And I'm going to show you, actually,
11:30
Ejaaz: from the horse's mouth himself, Leopold Aschenbrenner's letter that he shared with his investors.
11:37
Ejaaz: I'll give you the summary of what he says in this letter. Basically,
11:40
Ejaaz: he said, we had an extenuatingly bad month and we let you guys down and it is
11:45
Ejaaz: completely my fault. So in a month, the fund drew down 67%.
11:51
Ejaaz: However, year to date, the fund is still up 80%.
11:55
Ejaaz: So I just want to repeat that for a second.
11:57
Ejaaz: The fund drew down massively, 67%.
12:01
Ejaaz: Was still reported an 80% gain year to date.
12:04
Ejaaz: The only sole reason why they were able to report that is because of this little baby right here.
12:10
Ejaaz: Oh boy. And his anthropic investment. Poster child. Correct.
12:13
Ejaaz: So he sold a huge amount of anthropic shares and he got in super early.
12:18
Ejaaz: I think it was in their series eight rounds. So when the company was valued
12:21
Ejaaz: at $60 billion and they're now like, I mean, if you believe some of the secondary
12:26
Ejaaz: markets worth like $1.2 trillion or something like that.
12:29
Ejaaz: So he made a huge bab on that And he used that to basically quell the huge public
12:34
Ejaaz: market loss in that. And in this letter, he basically admits to his fault.
12:38
Ejaaz: But he says that these are extremely expensive scars that he needs to learn from.
12:42
Ejaaz: And the most important thing is he gets to live another day.
12:45
Ejaaz: Now, if you want to understand, you know, which investors are kind of okay with
12:49
Ejaaz: this and which investors might be bad, the early investors are probably okay
12:52
Ejaaz: with this. Definitely hurt. They're licking their wounds. But they're like,
12:55
Ejaaz: okay, I saw Leopold run this up.
12:56
Ejaaz: His thesis is still intact. So let's see what he can do.
13:00
Ejaaz: But if you were part of that capital call, which you mentioned earlier,
13:03
Ejaaz: Josh, which was like just before all of this was going bad when he was reporting
13:07
Ejaaz: like, hey, we're up 440% and we're taking on more capital, right?
13:11
Ejaaz: Because the markets were starting to draw down.
13:12
Ejaaz: If you put money at that point, so that was like a month and a week ago,
13:17
Ejaaz: You're gone. Like your entire LP share is erased. So that's what's not being
13:21
Ejaaz: spoken about publicly. And I just wanted to kind of like lay that out.
13:24
Ejaaz: It has been a brutal turn of events. And the worst part is
13:27
Ejaaz: He had his wedding this past weekend. So he was going into his wedding whilst
13:31
Ejaaz: all of this was happening.
13:32
Josh: That sounds like an absolute name. I really feel for the guy.
13:34
Josh: This has got to be such a tough learning experience.
13:36
Josh: But I mean, in a way, like you made it to the big leagues. Like he ran up this
13:39
Josh: fund from a couple hundred million dollars to 45 billion.
13:42
Josh: And now you're going to have to fight with the big dogs.
13:45
Josh: And Ken Griffin has done this before. He did this. What was the oil company?
13:48
Josh: Enron, I think it was. That went out of business.
13:50
Josh: It was unbelievable. So Ken Griffin is actually worth highlighting here in the
13:54
Josh: story because he is, I mean, a remarkable bailout investor in a way.
13:59
Josh: Ken Griffin is the type of guy that will never get a phone call,
14:02
Josh: but perhaps like once every five to 10 years, he'll get the phone call and it
14:05
Josh: will make him tens of billions of dollars every single time.
14:08
Josh: He's the guy that you could call to bail them out.
14:10
Josh: If anything goes wrong, if you are on the edge of bankruptcy,
14:13
Josh: you call up Ken, he'll send his guys over and he'll take care of it.
14:16
Josh: I know with that Enron story, at least I remember the story because it was so
14:18
Josh: amazing how he took a bunch of his top investment guys, put them
14:23
Josh: on a plane and flew them over to go actually be at the office and work overnight
14:27
Josh: to process all the books to see where the value was in the business and what
14:30
Josh: he discovered is that a lot of the value was in.
14:33
Josh: A few key people that were kind of managing the infrastructure that truly understood the business.
14:37
Josh: So he extracted those people. He started his own thing with them.
14:41
Josh: And then the rest of the company was kind of sold off to someone else.
14:44
Josh: And it was having a really tough
14:45
Josh: time. It didn't do well. But Ken and the team, I mean, what does it say?
14:48
Josh: The team built Citadel's commodity trading and made 30 plus billion dollars
14:52
Josh: so far where the UBS who bought Enron, they had to shut down Enron,
14:56
Josh: which was the business that it bought.
14:57
Josh: So Ken Griffin has done this before. He is the guy that you call leopold called
15:01
Josh: him it seems like he's always kind of at the center of some sort of you know
15:06
Josh: interesting cultural moment i remember the last one for for the people who were
15:10
Josh: involved in crypto it was the um,
15:12
Josh: oh what was this it was like the nash gamestop not game it was gamestop partially
15:17
Josh: and then there's the other the constitution.
15:18
Ejaaz: That's oh the constitution yeah yeah
15:20
Josh: Yeah see he's part of so many things all these cultural moments it's like okay
15:23
Josh: the gamestop moment he was in the constitution he was in like when people were
15:27
Josh: buying the constitution it's just like ken griffin is always there lurking in
15:30
Josh: the shadows and capitalizing on this.
15:32
Ejaaz: So i think that comes in i think when it's like always disastrous right like
15:36
Ejaaz: like i love that it's like yeah it's like the the game stop thing when
15:41
Ejaaz: capital was getting squeezed he was like all right i'll i'll bail you out for
15:44
Ejaaz: 10 billion dollars but like i think he got
15:46
Ejaaz: recurring percentage of their revenue from that fund for the immediate future
15:50
Ejaaz: and like for the long foreseeable future as well so he just like had passive
15:53
Ejaaz: income coming from this like billion dollar plus fund and then the other one
15:57
Ejaaz: I think I remember was the Amaranth thing.
15:59
Ejaaz: This was before my time. I think I was like a little baby, but I read up about
16:02
Ejaaz: this. And it's this guy, almost Leopold-esque.
16:05
Ejaaz: And he was trading gas futures, Josh. And he made like a similar return back then.
16:10
Ejaaz: And then he flew too close to the sun, blew up and sold his entire book to Ken
16:14
Ejaaz: Griffin. So actually, I think Ken has made the most money from these disaster
16:17
Ejaaz: situations. Just a shock.
16:19
Josh: Yeah, he's top dog. I mean, people are going to quickly learn when you get to
16:22
Josh: that size. Like you're going to have to deal with the big boys.
16:24
Josh: You're getting calls from J.V. Morgan. You're getting bought out by Citadel.
16:27
Josh: I mean, this is the reason why these behemoths that exist today.
16:30
Josh: Was leopold wrong or did he just get wrecked.
16:33
Ejaaz: Look at this chart josh you tell me look at this chart and you tell me that's so brutal
16:37
Josh: Okay so upon liquidating his entire position,
16:41
Josh: all of his holdings were up an unbelievable amount this is one day right this
16:44
Josh: is one day nebius one of his largest holdings up 27 percent iron
16:49
Josh: up 26 and a half percent bloom energy which we filmed an entire episode on up
16:53
Josh: 25 percent in a single day even sk heinic.
16:57
Ejaaz: But i mean even the salt to wound that closed out into this
17:01
Josh: By midday. It came up 16%. So his entire portfolio absolutely ripped, which signals to me.
17:07
Josh: And I mean, based on everything that we've been saying too, I mean,
17:09
Josh: the day before this happened, we filmed an episode saying the market's wrong
17:13
Josh: because we were watching the sell-off and we were trying to make sense of why
17:16
Josh: the market was selling these things off so dramatically. And I think now we
17:19
Josh: kind of have an answer. People were hunting Leopold's positions.
17:22
Josh: As soon as he got liquidated, as soon as those positions closed,
17:25
Josh: the entire market ripped. And I think it's a testament to.
17:28
Josh: To leopold in the fact that he was right it's just he was right with leverage and unfortunately
17:34
Josh: with leverage you are never truly secure you are never truly safe even if you're
17:38
Josh: right if you're right in the wrong way it's just as equal to being wrong and
17:42
Josh: that's kind of where he fell here but i think
17:44
Josh: directionally he is right and now we have to re-evaluate this question like
17:47
Josh: hey is this a good time to actually deploy money into these companies because
17:50
Josh: look they're doing well we just saw all the earnings reports from companies like google whose
17:55
Josh: cloud margin revenue is going through the roof their capex is going through
17:59
Josh: the roof they're so much that their cash flow negative for the first time in
18:02
Josh: company history so all these large cap companies are spending,
18:06
Josh: huge amounts of money we know where that's going it's going to land power shell
18:09
Josh: it's going to the chips it's going to the memory it's going to all the infrastructure
18:12
Josh: required to build these tokens and who are the people that are responsible for
18:15
Josh: this well we're looking at the list on screen right now so it seems like
18:19
Josh: leopold is right he's probably going to try to run this back as best he can i'm sure,
18:23
Josh: people shouldn't lose too much trust in him i mean that's like a touchy thing to say but
18:28
Josh: he wasn't wrong he was only wrong in terms of how he went about it hopefully
18:31
Josh: this is the learning experience and as we move forward the thesis still stands
18:35
Josh: and it can kind of continue along this journey of being that like,
18:39
Josh: poster child for the ai investment trade.
18:42
Ejaaz: Yeah. I want to give the other side of the coin here, which is like,
18:47
Ejaaz: what if Leopold is wrong?
18:48
Ejaaz: And there is a convincing enough argument that he might be. And this is not
18:53
Ejaaz: something I prescribe to, but I
18:55
Ejaaz: want to give that for the bears that are watching this show, right? Okay.
18:58
Ejaaz: So if you remember earlier in this episode, I said his thesis were two parts.
19:02
Ejaaz: One, that AI physical infrastructure was going to keep going up because the
19:06
Ejaaz: demand is way higher than anyone can conceivably think of.
19:09
Ejaaz: And number two, that he was going to be short software applications because
19:13
Ejaaz: AI model companies or labs like Anthropic and OpenAir are just going to absorb
19:17
Ejaaz: them, right? They're just going to get the model to train and do the thing that
19:20
Ejaaz: Microsoft's application can do, and then just replace Microsoft, right?
19:23
Ejaaz: But like you just said, Microsoft just had their earnings report,
19:26
Ejaaz: and it is the best that they've had.
19:28
Ejaaz: It's a record earnings investment for goodness knows how long at this point.
19:32
Ejaaz: And that's been a continuing trend across most software applications that Leopold
19:36
Ejaaz: was actually short in his most recent 13F findings, cybersecurity stocks,
19:41
Ejaaz: and a number of other ones, they are actually all up over the last couple of months.
19:45
Ejaaz: You know what hasn't been up over the last month, up until maybe like market
19:48
Ejaaz: open of like last week? It's these memory stocks, man.
19:51
Ejaaz: It's the AI physical infrastructure. NVIDIA actually is up 0.33% over the last month and a half.
19:57
Ejaaz: So like, there's a lot of things that are going on here that could potentially
20:01
Ejaaz: hint that Leopold's thesis is wrong that being said i don't think that that is correct personally
20:08
Ejaaz: purely because of all the demand that the likes of microsoft amazon hyperscalers
20:12
Ejaaz: are seeing on the cloud service side of things that's going to drive more memory
20:15
Ejaaz: demand it's going to drive more gpu sales from
20:17
Ejaaz: nvidia from amd it's going to drive more cpu sales from intel and the infrastructure
20:22
Ejaaz: play is very much still there now the question is
20:25
Ejaaz: is it already priced in? And that honestly is something that I can't answer
20:29
Ejaaz: because I don't know what people have invested in or like how much of their
20:33
Ejaaz: money they've invested.
20:34
Ejaaz: If you look at our friends in Korea who are housing two of the memory giants,
20:39
Ejaaz: they're all leveraged up, they're all borrowing from their banks.
20:41
Ejaaz: So I don't think we've quite seen that extent here in the West.
20:43
Ejaaz: But I do think we are in a position where like it could go up, it could go down.
20:47
Ejaaz: I don't know. But over the long term, I do believe infrastructure is still very
20:50
Ejaaz: much in demand and Leopold will ultimately end up being right,
20:53
Ejaaz: which is a very, very expensive lesson to learn on your wedding weekend.
20:57
Ejaaz: And I hope that the guy makes it out because like he's still,
21:00
Ejaaz: he's 25 years old. And I've seen a lot of people like hating on him.
21:03
Ejaaz: And like, listen, I understand, I get it. He's lost a lot of money.
21:05
Ejaaz: It was very irresponsible.
21:06
Ejaaz: But to pull something off, to have the returns that he had, he's still 80% up
21:11
Ejaaz: on the air. If you want to kind of take that number at face value,
21:13
Ejaaz: he's beaten a lot of the traditional head front still, right after this entire
21:16
Ejaaz: drawdown. And I hope he learns from it.
21:18
Ejaaz: And I think that he probably will and his thesis will play out.
21:21
Ejaaz: The next thing is RSI, recursive self-improvement. Josh, maybe we need to do
21:25
Ejaaz: an episode on that, I think.
21:26
Josh: Yeah, we're going to talk about that and many other things. There's a lot of
21:29
Josh: moving pieces now that are happening.
21:31
Josh: And when we look at the market, it's like we don't really know where things
21:34
Josh: are going. So the best you could do is guess.
21:36
Josh: And we've seen these guesses with like many, many multiples on the revenue of these companies.
21:40
Josh: It's starting to compress a little bit. We're starting to see that because of
21:43
Josh: the uncertainty. A lot of these companies are at capacity in terms of the bandwidth
21:46
Josh: that they can create. So the only surprises can come really from the downside
21:50
Josh: as opposed to the upside.
21:51
Josh: And there's a lot of these like market forces that are at play that are pushing against
21:55
Josh: this thesis at least in terms of the the memory companies the ai companies like
22:00
Josh: when you think about china they're getting much closer they're starting to turn
22:03
Josh: these tokens into commodities if they do they're fighting
22:07
Josh: an energy war with the u.s instead of an intelligence war with the u.s that makes things kind of,
22:12
Josh: slightly in their favor but i do agree on like the infrastructure trade at least
22:15
Josh: we need so much more power we need so much more memory we need so much more
22:18
Josh: tokens and assuming that continues to hold true um you got to assume that leopold
22:23
Josh: will be there so like nothing but respect for the guy sucks uh.
22:26
Josh: That's a bummer sorry to hear that you know what could have helped leopold is
22:30
Josh: if he was perhaps using i mean ledger have you heard of this because if you
22:34
Josh: are building with ai agents you're probably worried about security and an agent with unchecked access
22:38
Josh: is a problem um you can think of a portfolio with leverage is a problem similar
22:43
Josh: types of problems except
22:44
Josh: ledger is protection to help you solve this problem ledger lets the agents propose
22:49
Josh: it lets humans approve and then ledger signers enforce so there's this three-step
22:53
Josh: process that works with cloud code codex
22:56
Josh: cursor it's open source it's available today it works with all the things that we
23:00
Josh: work with there's basically this thing called the ledger agent stack and it
23:03
Josh: fixes this using open source tools that allow you to engage with agents and
23:07
Josh: then tell them exactly how you want things done approving them along the way
23:10
Josh: so thank you so much to ledger for sponsoring this episode
23:12
Josh: hopefully leopold can find his own version of ledger and yeah uh you can find
23:17
Josh: the link in the description down below at developer.ledger.com.
23:20
Ejaaz: Can we end this with a meme?
23:21
Josh: You got one?
23:22
Ejaaz: Let's see. Por favor. Yeah, I got one.
23:24
Josh: We named the fund situational awareness, but lacked the situational awareness
23:28
Josh: to sell when we were up 2200% in two years.
23:32
Josh: That's pretty good.
23:33
Ejaaz: That's pretty good. Some of these memes are so good, dude.
23:36
Josh: It brings me pain because it's like, yeah, dude, obviously. But also,
23:40
Josh: I mean, oh shit, I would stay rose gone too. Just with less leverage. Don't use leverage.
23:43
Ejaaz: Everyone knows. The lesson here is stay away from leverage, guys.
23:46
Ejaaz: Or if you're going to use leverage, certainly don't do 4X on a $45 billion book.
23:50
Ejaaz: What are you doing? You don't need $100 billion.
23:52
Ejaaz: Just you're already one of the best performing headphones in the world.
23:55
Ejaaz: Like, just chill out. But we will keep track of everything that is unraveling.
23:59
Ejaaz: When Josh and I filmed the last episode covering the Leopold story,
24:03
Ejaaz: which was literally a few days ago, the news was breaking as is.
24:06
Ejaaz: And as we wrapped up recording, all of this stuff came out.
24:08
Josh: So we were like, oh my God, we need a whole episode.
24:10
Ejaaz: We were like, we need to do another episode. So this is that episode.
24:13
Ejaaz: So if you enjoyed it and you are listening to this on YouTube or Spotify or
24:17
Ejaaz: Apple Music, wherever you are, please give us a rating, leave us a comment.
24:20
Ejaaz: It helps us out massively. We've been hearing from a lot of you.
24:23
Ejaaz: I got accosted in the street, Josh, from another fan that walked up.
24:28
Ejaaz: Dude, that's crazy. I was like, well, he goes, hey, you're that podcast guy.
24:32
Ejaaz: Like you were speaking about this episode.
24:34
Ejaaz: We're making moves. But I do say like if you see us in the street,
24:38
Ejaaz: like we would love to say hi to you. Like we don't know.
24:40
Ejaaz: We haven't met too many of our listeners that aren't, I guess,
24:43
Ejaaz: extended family and friends. So please come out to us, say hello,
24:46
Ejaaz: leave us a comment if you would like.
24:48
Ejaaz: It helps us out massively. Is there anything else?
24:51
Josh: We're covering both coasts now. I came back from SF. Eden is now in SF.
24:55
Josh: We're just like, we're going bi-coastal. We're getting the show done either
24:58
Josh: way. if you did enjoy this.
24:59
Josh: Don't forget, one of the most important things you could do is give us a new
25:02
Josh: listener. Share it with a friend who might also enjoy this. That really goes
25:06
Josh: a long way. And then, yeah, if you ever do see us, say hi. I mean, that'd be pretty cool.
25:09
Josh: It's fun to see the numbers on the screen translate to people in the real world.
25:12
Josh: So that's always a really good time. I hope you get recognized more.
25:15
Josh: You should just like, I don't really, I'm not super familiar with SF,
25:18
Josh: but like you should just go to like the hotspots, Ejaz, and just kind of sit
25:21
Josh: there and try to aura farm. Like, let me know if anyone comes up to you and
25:24
Josh: says hi and just like report back how many fans we actually have.
25:27
Ejaaz: Hey, maybe I'll see Leopold at a cafe at this point, dude. I think the dude's
25:30
Ejaaz: down bad. Maybe he'll be down to have a conversation. Well, wish him well for me if you do,
25:34
Josh: Because I really hope he pulls it together. I hope that this fund manages to
25:38
Josh: claw its way back, because I'm sure it will.
25:40
Josh: And yeah, that's Leopold's story. So thank you all so much for watching,
25:43
Josh: as always, and we will see you tomorrow on the next one.