August 2026 - Monthly Market Update
/Monthly Update || August 2026
“The few times that Soros has ever criticized me was when I was really right on a market and didn’t maximize the opportunity.”
Opening Remarks
Greetings from Ikigai Asset Management¹. We welcome the opportunity to bring to you our ninety-fifth Monthly Update and hope these are helpful in better understanding some of what we’re doing and what we’re seeing. We have the privilege of deploying capital on behalf of our investors into new technologies that have tremendous potential to make the world a better place and create trillions of dollars of value in the process.
We believe, in some cases, that we are obligated to be shepherds of some of these technologies – to do our little part to push ideas towards fulfilling their potential. We strive to be an objective, reasonable, well-intentioned voice of truth amongst a chorus of biased, fallacious, pernicious opportunists. It’s an honor that we take seriously.
To that end, July was a wild month in AI Value Chain stocks. A historic month, from a couple different angles. While the exact details are still somewhat murky, the really big headline is that Leopold Aschenbrenner’s Situational Awareness (“SA”) hedge fund effectively blew up this week. It appears SA was presumably hunted by one, and probably a group of, hedge funds.
Leopold got overleveraged and faced a margin call and significant forced liquidations of his positions. Citadel bought all his leveraged positions off him at the lows on 7/29 – a deal brokered by SA’s prime broker Goldman. On the morning of the 31st, Leopold sent this letter to his LP’s-
Dear Partners,
We let you down this month. We came closer to permanent capital impairment than is acceptable to us. While we ultimately found a solution that protected the fund and you as investors, our intention in running the fund is to never find ourselves in such a position in the first place.
Volatility is the price of long-term investment returns. Over the past two years, we have delivered outstanding results, despite occasional sharp pullbacks. But our fund must always be structured such that we can take a loss and fight another day.
I will make it my mission to ensure that we learn the necessary lessons from this experience.
Here is where things stand:
The portfolio experienced a significant drawdown over the course of July, which was exacerbated by extreme moves in core positions over the past week. Many AI names drew down by half or more, while our positive L/S spread reversed violently. While we could say much about how unusual the month was, we hold ourselves to a higher standard, irrespective of market conditions.
As these moves proceeded, we started to see increasingly adverse trading in names publicly associated with us. These dynamics are essentially similar to a bank run: vulnerability begetting more vulnerability. We worked to keep the portfolio within our risk parameters, but gradually this became more difficult as positions rapidly moved against us and market liquidity dried up.
On Wednesday night/Thursday morning, we took decisive action to protect LP capital. We traded a portion of our public portfolio in a block transaction to remove all leverage from the fund, and prevent further losses. All shorts were closed and reliance on portfolio financing removed. We currently manage a fully-paid-for public book (long stock and long fully-paid-for options, with no margin/liquidation risk). This restored stability and allowed us to preserve our private positions.
I take full responsibility for these events.
To be clear, this should rightly have been a very painful month in terms of the performance of our fund: when AI stocks draw down dramatically while AI technical/business fundamentals are improving, you should expect our fund to be down a lot. We embrace volatility. But it should never jeopardize the fund.
The fund was not shut down, liquidated, or transformed into a private-only fund.
We are continuing to operate as a hybrid public-private fund as before. However, we will manage our public book on a fully-paid-for basis while we draw the lessons from these developments. Most importantly: we took the steps that were necessary to fight another day.
In the coming weeks, I will focus on putting in motion the necessary changes—across our portfolio management, risk team, and vigilance applied across the board—to ensure a higher level of resilience going forward. AI may continue to intensify market volatility for years to come. These were very expensive scars, but I am dedicated to ensuring they will be invaluable lessons for our organization and for myself as we move forward. My core promise to you is that we will not waste the opportunity to learn from these events.
On the portfolio itself: we are very optimistic about the current investment opportunity set. The underlying fundamentals are accelerating at the very same time that prices have declined significantly.
Thank you for your patience and your partnership. I am fully invested alongside you—virtually all of my capital is in the fund—and I intend to work relentlessly to demonstrate that the events of this month have made me a wiser and stronger investor. I am available next week for 1:1 phone calls with each of you to discuss all of the above.
As an interim update, our current, unaudited estimate of net MTD performance is -67%, and of net YTD performance is +80%. Final figures will follow through our normal reporting process.
We will follow up regarding a group call next week to share further details.
All the best,
Leopold
There was also a lengthy WSJ article that came out on the 31st. It’s interesting but also paywalled. A few key takeaways-
AUM peaked at $45bn on July 1st
Fund was +439% YTD through 6/30
Regularly ran 3-4x levered directional plus options
Heavily concentrated positions
On 7/24 sent letter to LPs asking for more money
After letter, market immediately started hunting his positions
Was going to sell $3.5bn of Anthropic stock to Greenoaks and Sequoia, but backed out last minute
Citadel got >10% discount to 7/30 market value
Citadel had to bid against Jane Street and Millenium for SA portfolio
Public equity book is largely gone (but not entirely)
Owns >$10bn in Anthropic stock
So…Yeah…
There is a very good reason to think Citadel forced the SA collapse and was likely aggressively shorting on the way down, before buying SA’s entire portfolio off of them. It is not an exaggeration to characterize this event as one of the most predatory hits in modern financial history. Orchestrated by Citadel.
Crypto had a big event too, or rather the dragging out of the conclusion of a big event. I’m referring to the Clarity Act – the main piece of legislation that passed the House a year ago, has been sitting in the Senate, and is now coming down to the absolute 11th hour.
As I write this, Clarity Act has a slim chance of passing. It’s hard to know exactly what the odds are. Polymarket has it at 27% chance, down from a 50% chance at the beginning of July.
So things aren’t looking great for Clarity. But the HOPE of it maybe passing, combined with deeply oversold conditions, allowed crypto to bounce in July – BTC +7%, ETH +19%. TBD on whether those gains hold.
July Highlights
Clarity Act Passage Uncertain, But Unlikely; Only Tiny Window of Hope Remains
MSTR Sells 3,588 BTC for $216mm; Buys Zero BTC For First Time In Two Years; Sells $1.3bn of MSTR ATM Equity
RobinHood Chain Launches; Tokens Are Only Collapsing Memecoins and Rug Pulls
Previously Crypto-Focused VC Paradigm Raises $1.2bn AI Fund
Citadel Securities Invests $400mm in Crypto.com at a $20bn Valuation
BitMEX To Shut Down In September
BitMart Shuts Down, BMX Token Crashes
BTC Physical Wallet ColdCard Firmware Exploited; >$70mm BTC Stolen
SEC Commissioner Peirce Issues Warnings Against DeFi Vault Products
New York States Sues Kalshi; CFTC Immediately Sues NY AG To Block
State of Minnesota Tries To Ban Prediction Markets; Federal Judge Rules It CFTC Jurisdiction, Ban Put on Hold
| Asset Class | July | Q2-26 | Q1-26 | YTD | Q4-25 | Q3-25 | Q2-25 | Q1-25 | 2025 | 2024 | Instrument |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Bitcoin | 7% | -33% | -22% | -28% | -23% | 6% | 30% | -12% | -6% | 121% | BTC |
| NASDAQ | -7% | 28% | -6% | 12% | -6% | 2% | 18% | -8% | 20% | 25% | QQQ |
| S&P 500 | 0% | 15% | -5% | 10% | 2% | 8% | 11% | -5% | 16% | 23% | SPX |
| Total World Equities | -1% | 13% | -2% | 10% | 2% | 8% | 10% | -1% | 20% | 14% | VT |
| Emerging Market Equity | -6% | 20% | 4% | 17% | 2% | 11% | 10% | -5% | 31% | 4% | EEM |
| Gold | 1% | -14% | 9% | -6% | 11% | 16% | 6% | 19% | 64% | 27% | GLD |
| Long-Duration US Treasuries | -5% | 0% | -1% | -6% | -1% | 3% | -5% | 2% | -1% | -8% | TLT |
| High-Yield Corporate Credit | -1% | 1% | -1% | -1% | 1% | 4% | 3% | -2% | 6% | 8% | HYG |
| Copper | 5% | 10% | -2% | 13% | -6% | 11% | 15% | 2% | 23% | 19% | CPER |
| USD | -1% | 0% | -2% | 2% | -1% | -1% | -7% | -4% | -9% | 7% | DXY |
| Volatility Index | -3% | -55% | -22% | 7% | -8% | -4% | -24% | 28% | -14% | 3% | VIX |
| Oil | 21% | -16% | 84% | 87% | -6% | 1% | -5% | 2% | -8% | 13% | USO |
SOURCE: GROK. AS OF 7/31/26
Energetics
This will be a short one. I’m really just going to make one main point here today. It’s kind of a weird point but I’ve been struck by it all month, and even more so at the crescendo of Leopold’s blowup.
My point is this – there is a truly stunning amount of ENERGY in this AI Value Chain trade. That’s the point. I’ve been thinking about it for weeks now. I’ve been a full-time public markets investor for 15+ years, and I don’t recall ever trading anything with this much ENERGY.
Crypto couldn’t hold a candle. Even at the peak of crypto mania, it was a small drop in the bucket relative to the energy coursing through the AI Value Chain stocks. The dollar amounts we are dealing with are SO much bigger than anything crypto ever sniffed. At the peak, all of crypto was $4tn. The AI Value Chain wiped $4tn of market cap this MONTH.
There is SO much money pouring into this thing. Below is a table showing updated 2026 hyperscaler capex numbers-
Source: Grok. As of 7/31/26.
So the Big 4 are planning to spend about 3/4 of a trillion dollars in 2026 on capex. The 2027 capex number will be meaningfully larger. Wall St research is projecting $1.0-$1.2tn, which many think is undershooting. The 2028 capex number is projected to be at least somewhat higher than 27. So we’re talking about approximately a trilly a year for at least three years in a row, and prob more.
Here’s another way to think about these dollars. You know SoFi stadium? In LA where the Chargers play? Looks like this?
It cost $5.5bn…You get what I’m saying? The hyperscalers are going to build 182 of these every year for the next five years… That’s the type of scale we’re talking about here.
Yeah. So that’s #1 all-time in inflation-adjusted dollars for capex programs for all of humanity. In the history of this species, we’ve never spent so much money on anything, and we’ve never spent it this fast. It’s true, the railroad capex was a higher % of GDP at the time, and it stretched out over decades. But estimates of total railroad capex in inflation-adjusted dollars are only a paltry few hundred billy. AMZN will do that in the next 12 months.
So that amount of dollars brings so much ENERGY. And it brings so many eyeballs. And then the eyeballs bring more energy to the AI Value Chain trade further still. The peak of crypto mania had a lot of eyeballs on it. Nothing like this though. Crypto was retail-lead. Yes of course, retail is all over this sector, but so is every hedge fund on planet earth and most of the smartest directional macro guys own a ton of this stuff too. EVERYONE is actively investing in this stuff. So much ENERGY.
There are so many eyeballs on this thing because essentially ALL investors, whether it be retail or Citadel, are seeing and feeling the effects of AI in their daily lives. We all feel it, in various ways and to varying degrees. We all listen to the same AI leaders talk about how radically everything is about to change. We all see Claude solve a math problem that has been unsolved since 1939. Every month a new “best” model. One after another.
The term AI safety folks use is “take-off” – referring to an acceleration phase towards the singularity. We are trading the take-off of the AI singularity. All of us market participants, we feel it every day, consciously or otherwise. We all feel the same mix of emotions. Collective simultaneous excitement and terror, in varying doses depending on the person. Think about how much ENERGY is in that.
Another way to identify the energy in the AI Value Chain is to look at the blowups its causing. July started with Korea – a place with a storied history of leverage-driven market blowups. Korea is a collapsing nation – the lowest birth rate and one of the highest suicide rates. One of the causes/symptoms of this collapse is hypergambling. It’s in their culture.
Two of the top 4 memory companies are based in Korea, so the Korean stock market has been at the epicenter of this AI Value Chain trade. The KOSPI is the Korean stock index. It looks like this-
Source: TradingView. As of 7/31/26.
Down 43% in 40 days in a more or less straight line. Right into the 200DMA. And then an 18% bounce after Leopold blew up, which happens to be the largest single day % gain in KOSPI history. July still ended as the worst month for the KOSPI since the GFC.
A few headlines characterizing the carnage in Korea hit over the course of July-
Overall stock market margin levels declined 33% in July, mostly from liquidations
Goldman Sachs estimated that >1.2mm leveraged retail accounts received margin calls by mid-July, with 320k–360k accounts fully liquidated; that equates to roughly 3.4% of South Korea’s adult population receiving margin calls
Investors in their 20s and 30s accounted for about 62% of the liquidated accounts
The Korean government announced the launch of a nationwide debt/mental health counseling hotline
By any stretch, the Korean stock market blew up massively in July. And the AI Value Chain trade was right squarely in the middle of it. It was the ENERGY that caused the blowup. Korean investors, as they’re wont to do, got really caught up in the ENERGY of the AI Value Chain. They saw memory stocks go up 1,000% in a straight line in the last year and they thought they would keep going up in a straight line forever. They got FOMO from the ENERGY of the whole thing. And they blew up because of it.
Which brings us to Leopold. A historic blowup by any measure. In fact, in the history of hedge fund blowups, Leopold doesn’t really have an equal. There have been four somewhat similar blowups, but nothing with this much size, speed and (presumably) no crime.
Source: Anthropic. As of 7/30/26.
No one got more caught up in the energy of the AI Value Chain trade than Leopold. Wrote a blog post two years ago that changed the entire AI Value Chain investing landscape. Raised a huge fund incredibly quickly and plowed it all into AI Value Chain.
And he was exactly right. Nailed the trade. Nailed the timing. Even nailed the execution for a while. But too much leverage. Way too much. And it cost him many billions in P&L. So much ENERGY in a blowup like that.
And then the manner in which Leopold blew up. The whole thing is like something straight from an episode of Billions. Leopold got married TODAY. August 1st. Leopold was rumored to have missed his rehearsal dinner. Ken Griffin almost certainly knew Leopold was getting married this week. And Ken was rumored to have called in the kill shot on Leopold from a yacht off the coast of France. Seriously. Netflix is supposedly already in talks to option the story. Seriously.
See what I mean about ENERGETICS? Like something straight out of a movie. Will likely BE a movie at some point. Unfathomable sums of money flying around. Radical technological transformation at a breakneck pace. Massive stock market returns. Massive blowups. So. Much. Energy.
Honestly, what did you think trading the Singularity was going to be like?
Market Update— Liquid Markets Investing
| Name | July | Q2-26 | Q1-26 | YTD | Q4-25 | Q3-25 | Q2-25 | Q1-25 | 2025 | 2024 | Instrument |
|---|---|---|---|---|---|---|---|---|---|---|---|
| S&P 500 | 0% | 15% | -5% | 10% | 2% | 8% | 11% | -5% | 16% | 23% | SPX |
| NASDAQ-100 | -7% | 28% | -6% | 12% | -6% | 2% | 18% | -8% | 20% | 25% | QQQ |
| Magnificent Seven | 3% | 11% | -12% | 0% | -4% | 12% | 23% | -8% | 29% | 42% | MAGS |
| Bitcoin | 7% | -33% | -22% | -28% | -23% | 6% | 30% | -12% | -6% | 121% | BTC |
| Ethereum | 19% | -49% | -29% | -37% | -28% | 67% | 36% | -45% | -11% | 46% | ETH |
| Solana | -1% | -42% | -33% | -42% | -35% | 48% | 42% | -52% | -19% | 312% | SOL |
| BNB | 8% | -39% | -29% | -32% | -14% | 53% | 9% | -14% | 23% | 124% | BNB |
| Hyperliquid | -16% | 95% | 44% | 107% | -22% | 81% | 67% | -38% | 45% | n/a | HYPE |
| Aggregate Mkt Cap | 5% | 10% | -2% | -28% | -24% | 16% | 24% | -19% | -11% | 136% | TOTAL |
| Aggr Alts Mkt Cap (ex top-10) | -6% | -13% | -18% | -32% | -24% | 34% | 25% | -34% | -16% | 72% | OTHERS |
| Semiconductors | -21% | 95% | 9% | 68% | -8% | 15% | 28% | -12% | 32% | 49% | SOXX |
| Expanded Tech Software | 4% | 13% | -24% | -11% | -3% | 9% | 16% | -7% | 19% | 22% | IGV |
| ARK Innovation (disruptive tech) | -12% | 20% | -12% | -7% | -11% | 25% | 31% | -23% | 19% | 38% | ARKK |
| Robotics & AI | -7% | 14% | -8% | -3% | -8% | 19% | 22% | -15% | 15% | 30% | BOTZ |
| Quantum Computing | -15% | 54% | -2% | 29% | 7% | 38% | 59% | -31% | 88% | n/a | QTUM |
SOURCE: GROK. AS OF 7/31/26.
We’re not going to run through any charts this month. For the AI Value Chain stocks, almost all the charts did a big pullback this month. You could look at the TA on those pullbacks, but in my humble opinion, I think the TA is sort of muddied, so to speak. Korea blew up massively and Leopold blew up massively and I think that made all these charts do something they otherwise would not have done. Many of the AI value chain names just did a 40 – 70% pullback in the last ~6 weeks (albeit after running hundreds of % YTD). My guess is half of that was actual fundamental scares and TA overbought-ness (many of these names were massively overbought) and the other half was some combination of Korea and Leopold (and the HFs that were hunting them both).
Thursday morning I wrote this tweet-
That’s how I’ve felt all month and I frankly I felt vindicated at the end of the month when Leopold blew up because it explained this very strange “price action/fundamental boogeyman doom loop” that the market was doing. Worth noting, that tweet has 99 likes and 75k views. That’s a rare ratio. It means it was read and sent around a lot, even if it not a lot of people wanted to like it. That gives me increased confidence what I said there was accurate.
My base case is that this AI Value Chain trade is not over yet. I think the trade will broadly make new highs in the future. It is my base case those broad highs will occur in 2026. And then more on top of that in 2027. That’s what I think we’re dealing with here. I could be wrong. I am often. But that’s my base case.
On crypto, there’s no reason to post charts because the direction of the charts will likely be dictated by the outcome of the Clarity Act. If Clarity Act passes, prices are going up, at least for a bit. If Clarity fails, or even fails to garner a vote, crypto will likely teleport to the bottom of the range and those range lows will likely not hold.
I do not think Clarity is going to pass, so I think crypto is heading lower. There’s a small chance Clarity passes. There’s a REALLY narrow path, which might include a vote AFTER the August recess. Possible, but unlikely, I think. We’ll know for sure by next month’s letter.
Closing Remarks
Earlier I was talking about the “collective simultaneous excitement and terror” that AI is causing. There are many components of both the excitement and the terror. One of the components of the terror is the idea that AI is going to “take your job”. Whatever your job may be, AI is going to take it from you. And you won’t be able to make a living.
And that is a real risk. It’s not some made-up thing. AI + robotics is almost certainly going to completely redefine the concept of “work” for humanity, and it’s not going to take that long. A decade from now, things will be quite different. A few decades from now – unrecognizable. So we all feel this collective anxiety about not being able to earn money by providing value anymore.
The thing that I’m continually struck by, is that if you believe this to be true (technology will take your job), the absolute best hedge you can have is to own as much stock as possible in the companies doing the disrupting. The value creation and value accrual is already super lumpy – we see that in the earnings reports and stock charts of the AI Value Chain stocks. Think of the memory names and the semis. They are printing breathtaking revenue and profit growth, and their stock prices are reflecting that. That’s because this race to the AI singularity is a very wealth-concentrating process. AI is a fundamentally wealth-concentrating technology. Heavily so.
And so everyone is incentivized to find the companies that are capturing the most value and to buy as much of their stock as possible. And that’s your hedge. Everyone is incentivized to act like this.
The amazing thing is that this incentivization framework I just described ends up generating the fuel that’s required to take us to the AI Singularity. The Singularity is going to need a LOT of capex dollars. We already talked about that. Where are all those capex dollars going to come from? Equity and debt issuance. Investors trying to generate attractive returns by investing in disruptive technology companies. Do you see the circularity? The reflexivity? The self-referential nature?
Technology is going to take our jobs. The companies that build the technology that is going to take our jobs will be worth a lot. We buy the stocks (and debt) of the companies that are building the technology that is going to take our jobs. By buying the stocks (and debt), the companies in turn have the money to spend to build the technology that will take our jobs. When the companies build that technology, the stock prices will go up a lot. And if we own enough of the stock, we will be rich. We will be out of a job because technology took it, but we will be rich because we owned the company that made the technology.
The whole world gets sucked into this because the incentives all align. Each individual actor along the way is incentivized to do what he needs to do in order for the outcome I described above to come true. So that is what is probably going to happen. Do you feel that ENERGY?
“The mouth is the source of calmaity.”
-Japanese Proverb
Travis Kling
Founder & Chief Investment Officer
Ikigai Asset Management
1. Ikigai Asset Management is the trade name for a collection of advisory and consulting businesses operated by Travis Kling, Anthony Emtman, and their team.
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