Citadel Buys Situational Awareness’s Stock Portfolio After Big Losses in AI
The highflying hedge fund run by Leopold Aschenbrenner is in crisis mode after AI-related bets sank
- AI-focused hedge-fund firm Situational Awareness sold the bulk of its stock portfolio to Citadel after suffering deep losses.
- Led by former OpenAI employee Leopold Aschenbrenner, Situational Awareness had amassed over $20 billion in assets under management since its founding.
- Situational Awareness still holds its private company investments, which include bets on AI giant Anthropic.
Situational Awareness, the once-highflying AI-focused hedge fund, sold the bulk of its stock portfolio to Ken Griffin’s investment firm Citadel after suffering deep losses, according to people familiar with the matter.
It marks a sudden downfall for Situational, led by former OpenAI employee Leopold Aschenbrenner. It had amassed well over $20 billion in assets under management since its founding just around two years ago, making it one of the fastest-growing firms in years. Aschenbrenner, who is in his mid-20s, was seen by some as an AI oracle, with other investors closely tracking his firm’s movements as it placed big, leveraged bets.
As investors shed positions in artificial-intelligence related stocks, Situational was under pressure to raise cash, either through sales of holdings or new capital commitments, to meet margin-call demands from its lenders, some of the people familiar with the matter said.
Its public investments include companies in the AI supply chain such as memory-chip makers SK Hynix and Sandisk, fuel-cell maker Bloom Energy and AI cloud-computing provider Nebius Group. Shares in all of those companies had plummeted over the past month as investors soured on AI and technology stocks amid worries about massive capital expenditures and higher borrowing costs.
Shares of companies in Situational’s portfolio rose Thursday after news of Situational’s stock sales surfaced.
Situational had borrowed money from banks to amplify its bets on stocks. Citadel only purchased the portion of the firm’s public-stock portfolio that was financed with borrowed money, while the firm held onto the remainder that it funded with its clients’ capital, the people said.
Situational also still holds its private company investments, which include bets on AI giant Anthropic, some of the people familiar with the matter said. The multistrategy hedge-fund firm Millennium Management had also bid on Situational’s stock portfolio, those people said.
Aschenbrenner had no professional investing experience when he launched the firm with a few hundred million dollars.
Early backers included Stripe co-founders Patrick and John Collison, as well as Daniel Gross and Nat Friedman, who are both currently helping lead Meta Platforms’ AI efforts.
It was seen as a coup when Situational attracted institutional investors including quant trading firm Jane Street, which ranks among Wall Street’s most profitable firms and rarely allocates capital to outside managers.
Some investing veterans had watched Aschenbrenner’s ascendance with both envy and worry, concerned a sudden collapse would drag his stocks down.
Aschenbrenner rose to prominence with a 2024 essay, called “Situational Awareness: The Decade Ahead,” that foresaw the path of AI’s development. He quickly attracted a cult-like following on the internet, and his investment firm’s routine regulatory filings are studied like scripture.
Citadel, with $71 billion in assets under management, is one of the world’s largest hedge-fund firms. It has a long record of acquiring assets from forced sellers.
CNBC earlier reported that Situational Awareness had sold its public investments, and Financial Times earlier reported the firm had been seeking fresh capital.