AI hedge fund Situational Awareness sells public portfolio to Citadel after steep losses

Leopold Aschenbrenner founded Situational Awareness in 2024 after his departure from OpenAI, where he had joined the superalignment team in 2023 following his graduation as valedictorian from Columbia University at age 19 (he had enrolled at age 15). He was dismissed from OpenAI after about a year over what the company described as improper disclosure of internal information. The fund raised several hundred million dollars at launch, with early backing from quant-trading firm Jane Street, Stripe co-founders Patrick and John Collison, and Meta executives Daniel Gross and Nat Friedman. Aschenbrenner's central investment thesis, developed through published essays, held that scaling AI would require major infrastructure build-up in semiconductors, compute, memory, and energy. This conviction drove strong early returns: the fund returned 439% for the year through June and grew to roughly $45 billion in assets under management at its peak.

The fund's portfolio was heavily concentrated in AI infrastructure equities, including memory chip producers SK Hynix and Sandisk, clean energy developer Bloom Energy, and neocloud provider Nebius Group. Beginning in late July, these positions collapsed more than 30% in a month as broader investor sentiment shifted. The selloff was amplified by Situational Awareness' use of leverage—a hedge fund strategy of using borrowed money to purchase stocks, which magnified losses as prices fell. In a July 24 letter to investors reviewed by Financial Times, Aschenbrenner characterized the downturn as "one of the best buying opportunities since early last year" and invited clients to commit fresh capital starting August 1. However, according to Bloomberg, the appeal failed to attract the commitments he had hoped would materialize.

Facing mounting losses and shrinking assets, Situational Awareness sold the majority of its public stock portfolio to Ken Griffin's Citadel. The sale resulted in the fund's assets falling to roughly $10 billion from around $20 billion in recent months. Citadel's purchase aligns with the hedge fund's established pattern of acquiring assets from leveraged players forced to unwind during market stress; Citadel's own portfolio already featured similar AI infrastructure bets, suggesting that Griffin, like Aschenbrenner, expected the sector to recover over a longer horizon but had greater financial capacity to wait out volatility. Crucially, Situational Awareness did not sell its private company stakes. The fund continues to hold a $5 billion stake in Anthropic, the AI safety startup valued at $965 billion in its May Series H funding round. Anthropic is expected to go public as soon as October at a potentially higher valuation, and a windfall from those shares could offset a portion of the hedge fund's public-market losses. Situational Awareness also maintains positions in chipmaker MatX and AI data center startup Fluidstack, which was reportedly in talks in April to raise a new round at an $18 billion valuation.