Citadel buys Situational Awareness equity holdings after steep AI losses
Deal comes after Leopold Aschenbrenner’s investment firm held overnight crunch talks with investors
Ken Griffin’s Citadel has swooped in to buy a large portion of hedge fund Situational Awareness’ $16bn public equity holdings after Leopold Aschenbrenner’s investment firm was wrongfooted in the AI sell-off.
Citadel, a $71bn multi-strategy hedge fund, forged the crunch deal within the past 24 hours, according to multiple people familiar with the matter, in one of the largest rushed stock transactions in Wall Street history.
The deal comes after Situational Awareness held urgent talks with multiple investors late on Wednesday about selling a significant portion of its public holdings, the people familiar with the matter said.
Situational Awareness also has private stakes in companies including a $5bn Anthropic holding. It will continue to run as a private investment firm, said one person familiar with the matter.
Citadel, one of the world’s largest hedge funds, is known for its ability to mobilise its vast resources to take advantage of huge sell-offs or other dislocations in markets. Its decision to pounce on Situational Awareness’s assets came during a moment of turbulence in markets, with AI stocks having sustained heavy losses in recent weeks.
The tech-heavy Nasdaq 100 soared more than 3 per cent on Thursday, in a move partly fuelled by relief that Situational Awareness would not need to rapidly unwind its holdings into the market because of the Citadel transaction.
The FT first reported on Wednesday that Situational Awareness, known for large, concentrated positions in AI stocks, was in talks with investors to sell assets or raise fresh capital. It also used significant amounts of borrowing to increase its returns, leaving it vulnerable during the recent downturn in tech shares.
Situational Awareness halted the conversations with some smaller investors in its fund overnight on Wednesday and shifted its attention to getting a deal done with one large buyer in an effort to speed up the process and minimise losses, said people briefed on the matter.
At least three multibillion-dollar hedge funds including Millennium Management held talks with Situational Awareness over the past 24 hours to get a deal done, said people briefed on the matter.
Goldman Sachs and JPMorgan Chase, two of Situational Awareness’s prime brokers, were involved in the negotiations to sell the public equity book, some of the people added.
Situational Awareness did not immediately respond to requests for comment. Goldman, JPMorgan Chase, Citadel and Millennium declined to comment.
Hedge funds borrow from prime brokers to finance their purchases of stocks on public markets as a way to magnify returns, but banks can also work with firms to sell positions in an orderly manner.
Aschenbrenner struck an upbeat attitude with investors as recently as last Friday when he disclosed in a letter returns of 439 per cent from the start of the year to the end of June.
In the letter, he encouraged investors to inject more money into the fund.
“PS. At times we call out opportunities that seem like a particularly good time to add funds, if you have been waiting for one,” he said, offering investors the ability to invest new cash on August 1.
The hedge fund has operated with a skeleton staff, with only four investment professionals and a total of eight employees, according to its most recent regulatory filing.
Aschenbrenner, who had no previous trading experience before starting the fund, worked for the FTX Future Fund, the philanthropic arm of Sam Bankman-Fried’s empire before it collapsed in late 2022. He later joined OpenAI’s “Superalignment” team before being fired over an alleged leak.
The German-born investor became well known in Silicon Valley in 2024 after writing an essay titled “Situational Awareness” that detailed how he expected AI to dramatically reshape society in the coming years.
The sale to Citadel is a dramatic reversal for the investor, who had until recently enjoyed a cult following in Silicon Valley and on Wall Street for his prescient and aggressive bets on AI-linked companies. He was a frequent guest on podcasts and had amassed more than 250,000 followers on X.
“Before long, the world will wake up,” he wrote when he first launched the fund in 2024. “But right now, there are perhaps a few hundred people, most of them in San Francisco and the AI labs, that have situational awareness. Through whatever peculiar forces of fate, I have found myself amongst them.”