Situational Awareness invested $500 million in chip startup Source Foundry

Investing.com -- Situational Awareness invested a total of $500 million in semiconductor manufacturing startup Source Foundry, Bloomberg reported, citing people familiar with the matter.

The hedge fund, founded by former OpenAI researcher Leopold Aschenbrenner, initially committed $100 million to the privately held company before making a further $400 million investment.

The Wall Street Journal first identified Source Foundry as the recipient of the previously undisclosed investment. Venture capital firm Sequoia Capital backs the startup.

Representatives for Situational Awareness and Source Foundry did not respond to requests for comment. Sequoia declined to confirm the hedge fund’s investment.

The additional funding was made days after Situational Awareness came close to collapsing at the end of July, when sharp declines in several of its publicly traded technology holdings triggered mounting collateral demands from banks.

Aschenbrenner reached an agreement with Citadel founder Ken Griffin to sell part of the fund’s public equity portfolio at a 10% discount as it sought to meet those demands.

Source Foundry is seeking to develop a semiconductor manufacturing process that is simpler, less expensive and faster than current production methods. Its goal is to address the growing gap between demand for artificial intelligence computing power and the industry’s ability to expand chipmaking capacity.

“AI demand is growing on an exponential software curve, while semiconductor manufacturing capacity is growing on a linear industrial-equipment curve,” Sequoia partner Stephanie Zhan said.

Zhan described the mismatch as the “chip wall” and said Source Foundry planned to use different underlying physics to increase the speed and scale of semiconductor production.

The large investment reflects continued demand for new chipmaking technologies as AI developers require increasing amounts of computing capacity. 

Still, the commitment also highlights the concentrated exposure taken by Situational Awareness shortly before volatility in its public technology holdings placed the fund under severe financial pressure.