In July 2026, AI infrastructure stocks faced a significant downturn, with the VanEck Semiconductor ETF (SMH) dropping approximately 25% and the iShares Semiconductor ETF (SOXX) declining close to 30%. This selloff was largely attributed to the actions of Situational Awareness, a hedge fund led by Leopold Aschenbrenner, which reportedly operated with a leverage ratio of at least four to one. The fund’s liquidation triggered widespread institutional selling in the tech sector as concerns grew over potential losses from Aschenbrenner’s positions.
As a result, Situational Awareness’s value plummeted by about 67% in July, prompting many portfolio managers to preemptively offload shares in common with the fund. Despite this, forward earnings estimates for the Philadelphia Semiconductor Index increased by roughly 10% during the same period, indicating a fundamental contradiction to the falling stock prices. Analysts suggest this discrepancy presents a potential buying opportunity, as established tech giants such as Amazon, Microsoft, Meta, and Alphabet have consistently raised their capital expenditure projections, signaling continued investment in AI infrastructure.
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