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The Philadelphia Semiconductor Index entered bear market territory, down over 20% in the last month, triggering a cascade of forced liquidations that wiped out a legendary hedge fund and exposed dangerous leverage across the South Korean market. The index bounced back 7% on the day of taping, but for 25-year-old hedge fund manager Leopold Aschenbrenner, the rebound came too late — his entire public portfolio had already been sold.

The Leverage Wipeout

Aschenbrenner left OpenAI two years ago to start his own fund with $225 million. He grew it to $20 billion, then ran it to roughly $45 billion at its peak by riding the AI and chip wave on leverage. According to reports, he was running about 3.5 turns of leverage. When the semiconductor index dropped 25% over three weeks, that leverage amplified the move to roughly 75%. His prime brokers called in his positions, and Citadel's Ken Griffin reportedly bought the entire book.

"Leverage is the only way that smart people go broke," Sacks said, paraphrasing Buffett or Munger. "If you're not using leverage, your portfolio would just be down 30% this month. And then it would already be up 7% today. So you'd be rebounding. But if you're leveraged three or four X, you're wiped out."