Situational Awareness, the AI-focused hedge fund founded by former OpenAI employee Leopold Aschenbrenner, has sold a large chunk of its public stock portfolio to Ken Griffin’s Citadel after a sharp selloff in AI-linked shares, according to multiple reports.
Reuters reported Citadel bought most of the fund’s stock holdings. Axios reported the sale covered all of them. Bloomberg, CNBC, The Wall Street Journal and the Financial Times also reported on the fund’s steep losses and asset sales. The common picture is ugly: a concentrated AI trade went against a young fund that had marketed itself as unusually well informed about where artificial intelligence was heading.
What happened to the Situational Awareness hedge fund?
CNBC reported that Situational Awareness was valued at $45 billion at the start of July. Bloomberg reported that, after the Citadel sale, its assets had fallen to about $10 billion. CNBC said the fund had eight employees, including four investment professionals.
The fund’s public bets were heavily exposed to AI infrastructure and related companies. CNBC reported that its largest first-quarter holdings included Nebius Group, Sandisk, Micron and CoreWeave, and that all four stocks had dropped more than 35 percent during the month.
The scale of the reported drawdown is large even by hedge fund disaster standards. The Wall Street Journal reported that Archegos Capital Management lost $8 billion in 10 days in 2021. If the reported Situational Awareness figures hold, its losses would be several times that amount.
How leverage turns a bad trade into a forced sale
Hedge funds often borrow against their portfolios to increase returns. That works when the trade rises. When the trade falls, lenders can demand more collateral through a margin call. If the fund cannot satisfy that demand with cash or fresh capital, it may have to sell liquid assets fast, usually at exactly the wrong time.
Bloomberg columnist Matt Levine described the logic bluntly: a manager who is convinced AI stocks are the future may put far more than the fund’s own capital into that thesis. The same leverage that amplifies gains also magnifies losses when the stocks move down.
The Financial Times reported that Situational Awareness held calls with investors and lenders to raise more capital and offered some investors the chance to buy pieces of its portfolio. The FT later reported that the fund sold a large portion of its $16 billion public-equity book to Citadel.
Situational Awareness still had private holdings after the public-stock sale, according to the FT, including a $5 billion stake in Anthropic. CNBC reported the fund was also in talks to sell that position, though it was not clear whether a transaction had closed.
Who is Leopold Aschenbrenner?
Aschenbrenner is 24 and previously worked on OpenAI’s superalignment team. Fortune reported that OpenAI fired him for leaking internal information. He later published a series of essays called “Situational Awareness,” which argued that powerful AI systems and artificial general intelligence would arrive soon. For background on the current systems behind much of the AI boom, see Kernel’s explainer on how LLMs answer prompts.
In a 2024 podcast interview with Dwarkesh Patel, Aschenbrenner described the investment firm as “kind of like a brain trust on AI” and said it would have more situational awareness than money managers in New York. He also said, “Obviously, not blowing up is task number one and two.”
The fund attracted notable backers. Max Read reported that Patrick and John Collison, Daniel Gross and Nat Friedman were among its supporters. The Wall Street Journal reported in June that Jane Street invested in the fund, noting that the trading firm rarely puts capital with outside money managers. The fund’s director of research was Carl Shulman, who had worked at Peter Thiel’s Clarium Capital.
The lesson for AI finance is not complicated: conviction is not risk control. A thesis about superintelligence does not stop a margin call.
This story draws on original reporting from The Verge.
