AI financing boom shows new strains as leverage rises

A sharp retreat in AI and chip stocks has highlighted the fragility of a funding boom increasingly powered by leverage and debt. Situational Awareness, the San Francisco hedge fund led by Leopold Aschenbrenner, sold its public stock portfolio to Citadel after margin calls created a liquidity crisis, despite core holdings such as SanDisk, SK Hynix and CoreWeave remaining well above year-ago levels.

The episode has raised concern over how quickly AI-linked wagers can unravel when highly valued companies face steep pullbacks. Declines of roughly 30% on core holdings were enough to force the fund into a cash crunch, underscoring the risk of layering borrowed money on top of already elevated expectations.

Nvidia’s expanding investment activity is another warning signal. The company made a $5 billion commitment to Safe Superintelligence, with much of the capital expected to go toward Nvidia gear, and is reportedly discussing a loan guarantee for OpenAI of as much as $250 billion. Nvidia also participated in 283 funding rounds between 2021 and 2025, with 85% of those investments in AI startups.

Corporate and financial investors are taking a larger role in the AI buildout as data centers and chips demand vast capital. Corporate venture investing has accounted for almost 90% of all VC dollars going into AI firms this year, while firms such as Jane Street, Goldman Sachs Asset Management, Blackstone, and Blue Owl Capital are financing infrastructure through equity stakes, cloud commitments, and major loan packages.