Situational Awareness bets $400M more on chip startup Source Foundry days after near-collapse

Hedge fund Situational Awareness has invested a further $400 million in Source Foundry, a chip manufacturing startup, according to people familiar with the matter. That takes its total backing to $500 million, following an initial $100 million investment.

Founded last year by Stanford researchers Abdulmalik Obaid and Joe Burg , the startup aims to reinvent how AI chips are manufactured. It plans to build new machines, equipment, and software to challenge Dutch firm ASML, whose extreme ultraviolet lithography machines can cost more than $400 million each.

The bet lands just days after Situational Awareness nearly collapsed in late July. Founder Leopold Aschenbrenner , a 24-year-old former OpenAI researcher, sold most of its public stock portfolio to Ken Griffin's Citadel at a discount after tech holdings lost value and lenders demanded more collateral.

The startup is targeting the core bottleneck in AI computing: chip manufacturing capacity. "AI demand is growing on an exponential software curve, while semiconductor manufacturing capacity is growing on a linear industrial-equipment curve," said Stephanie Zhan, a partner at Sequoia. "That widening mismatch is the chip wall."

Building commercially viable lithography technology takes many years, and Source Foundry faces rivals including Substrate, xLight, and Inversion Semiconductor. Its backer, meanwhile, retains a fragile position after the July rout, though it kept its private stakes, including a multibillion-dollar holding in Anthropic.

Even after a brush with collapse, Aschenbrenner is doubling down on early-stage, technically ambitious bets rather than retreating. The deal underscores investor appetite for reshoring the chip supply chain — and for cracking ASML's grip on the machines that make AI possible.