Citadel buys Situational Awareness stock portfolio after AI rout

Citadel buys Situational Awareness after a sharp reversal in AI-linked stocks, according to reports from the Financial Times, The Wall Street Journal and Reuters. For everyday investors, the episode is a reminder that even high-profile AI trades can turn quickly when leverage, falling stock prices and lender pressure meet.

The Financial Times reported Thursday that Ken Griffin’s Citadel purchased a large share of the public stock portfolio held by Situational Awareness, the hedge fund started by former OpenAI researcher Leopold Aschenbrenner. The FT said the portfolio was sold at a discount after July’s selloff in artificial intelligence stocks.

The Wall Street Journal reported that Situational Awareness dropped about 67% in July, citing a person who had seen a letter sent to investors. The same letter said the fund was still up roughly 80% for the year, according to the Journal. The Financial Times had earlier reported that the fund had gained 439% through June.

What happened to Situational Awareness?

Situational Awareness had built large positions in companies tied to AI infrastructure, including public stocks and private investments. Reuters reported that the fund sold most of its leveraged public stock holdings to Citadel while keeping about $10 billion in stocks and private investments, including a stake in Anthropic.

Leverage means using borrowed money to increase exposure to investments. It can lift returns when prices rise, but it can also force fast selling when prices fall because lenders may demand more cash or collateral, a demand known as a margin call.

The Journal reported that Situational Awareness needed cash to meet margin calls from lenders. Reuters reported the leveraged-portfolio detail but said it could not establish whether formal margin calls had been issued before the sale.

The Journal also reported that Situational Awareness agreed late Wednesday to sell $3.5 billion of Anthropic shares to a group led by Greenoaks and Sequoia Capital, then pulled back from that deal Thursday morning.

Which AI stocks were under pressure?

Several public companies linked to Situational Awareness fell sharply in July, according to Yahoo Finance data cited in the reports. Sandisk remained down about 44% for the month even after closing Thursday up 26%. CoreWeave fell nearly 26% in July, while Bloom Energy was down around 32%.

A US Securities and Exchange Commission filing showed Situational Awareness held direct share positions in Sandisk, CoreWeave and Bloom Energy as of March 31. The same filing showed about $1.11 billion in shares of seven Bitcoin mining companies, including Iren, Core Scientific, Riot Platforms and CleanSpark.

Those Bitcoin miner holdings gave the fund exposure to companies trying to use power supplies and data center locations for AI and high-performance computing, according to Cointelegraph’s earlier reporting. It remains unclear which specific stocks Citadel bought from Situational Awareness, or whether Situational Awareness kept any of its Bitcoin miner positions.

Aschenbrenner named the fund after his 2024 essay series, “Situational Awareness: The Decade Ahead,” which argued that artificial general intelligence could arrive by 2027 and create intense demand for computing power and electricity. Before OpenAI, Aschenbrenner was part of the FTX Future Fund team and signed its November 2022 resignation notice as FTX collapsed.

Cointelegraph said it contacted Situational Awareness and Citadel for comment and had not received responses by publication.

This story draws on original reporting from Cointelegraph.