diff --git a/magi_compiler/_api.py b/magi_compiler/_api.py
index 6f91ddf..2c25cb9 100644
--- a/magi_compiler/_api.py
+++ b/magi_compiler/_api.py
@@ -157,7 +157,30 @@ def _run_orchestration(state: MagiCompileState, args, kwargs):
             state._ensure_compiled()
 
             if state.compile_config.aot:
-                state.aot_compile(*args, **kwargs)
+                try:
+                    state.aot_compile(*args, **kwargs)
+                except Exception as e:
+                    # AOT compile can fail for models using SimpleFSDP/DTensor
+                    # (e.g. "Attempted to read undefined local variable").
+                    # Fall back to the JIT path so the model still compiles.
+                    magi_logger.warning(
+                        "AOT compile failed (%s: %s), falling back to JIT path "
+                        "for %s",
+                        type(e).__name__,
+                        e,
+                        state.original_code_for_hook,
+                    )
+                    state.compile_config = state.compile_config.model_copy(
+                        update={"aot": False}
+                    )
+                    # Reset compiled_entry: it was created with AOT-only
+                    # guard_filter_fn, need a fresh one for JIT bytecode
+                    # capture.
+                    state.compiled_entry = None
+                    torch._dynamo.reset()
+                    state._ensure_compiled()
+                    with state._jit_capture_compiled_bytecode():
+                        return state.compiled_entry(*args, **kwargs)
             else:
                 with state._jit_capture_compiled_bytecode():
                     return state.compiled_entry(*args, **kwargs)