Days after nearly dissolving, Situational Awareness has invested a further $400 million into Source Foundry, the chip startup founded by Stanford researchers, bringing its total commitment to $500 million, according to the Wall Street Journal.
The round values Source Foundry at $5 billion, per the Journal. To put that in context: the fund writing this cheque just sold off the bulk of its public portfolio at a reported discount after a catastrophic July.
A Startup Taking Aim at ASML
Source Foundry was co-founded by Abdulmalik Obaid and Joe Burg, both Stanford researchers with an ambitious target: build the next generation of machinery, tooling, and software for AI chip fabrication. The direct competitor they have in their sights is ASML Holding, the Dutch company that currently dominates the supply of extreme ultraviolet lithography systems underpinning advanced semiconductor production. A single ASML machine can cost more than $400 million. If that number sounds familiar, it is roughly what Situational Awareness just committed to the startup aiming to disrupt it.
Sequoia Capital had already backed the company before this round. Source Foundry’s rivals in the commercially viable lithography space include Substrate, xLight, and Inversion Semiconductor, according to Dealroom. None of them have yet demonstrated the kind of production-scale machinery that would actually threaten ASML’s stranglehold, but that is presumably the pitch.
The initial Situational Awareness stake in Source Foundry was $100 million, according to The Business Times. The new $400 million infusion, arriving days after the fund’s near-collapse, is the kind of move that either looks like conviction or like someone who hasn’t quite recalibrated their risk appetite. Possibly both.
How the Source Foundry Chip Startup Bet Fits Into a Very Messy Picture
Situational Awareness was founded by Leopold Aschenbrenner, a former OpenAI researcher who launched the AI-focused hedge fund in 2024 with no prior trading experience. The early returns were extraordinary: the fund reportedly delivered a 439% return through June 2026 on concentrated long positions in AI hardware names including SK Hynix, Nebius, and Micron, according to Crypto Briefing.
Then July happened. The fund reportedly lost around 67% of its value in a single month as AI infrastructure stocks slid. At its peak earlier in July 2026, Situational Awareness had reached $45 billion in assets under management before collapsing to around $10 billion, according to people with knowledge of the situation cited by CNBC. The snippet figure of a fall from $20 billion to $10 billion reflects a lower starting point; the CNBC-reported peak of $45 billion tells a steeper story.
Leverage, reported at up to 400%, amplified the damage. Forced selling hit concentrated positions including SK Hynix and CoreWeave hard.
At the end of July, the fund sold the majority of its public equity portfolio to Ken Griffin’s Citadel. That portfolio was valued at approximately $16 billion, and Citadel reportedly acquired it at a discount of around 10%, with Goldman Sachs and JPMorgan among the prime brokers facilitating the sale, according to Reuters. Before the sale, roughly two-thirds of the fund’s holdings had been in public equity long and short positions; the remainder sat in private stakes, dominated by a multibillion-dollar Anthropic investment that the fund held on to.
Which is what makes the Source Foundry chip startup bet worth watching. Situational Awareness is now, by necessity, a private-market vehicle. Its surviving assets are Anthropic shares and half a billion dollars in a Stanford-founded lithography challenger that would need to unseat one of the most deeply entrenched capital equipment monopolies in modern technology. Aschenbrenner is apparently unbothered: he also recently got married. The Source Foundry bet, at least, will take a little longer to judge.
