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Situational Awareness Sells Public Stock Portfolio to Citadel After Heavy AI Losses

Situational Awareness, an AI-focused hedge fund launched in 2024 by former OpenAI researcher Leopold Aschenbrenner, has sold the majority of its public stock portfolio to Ken Griffin’s Citadel following significant market losses. The transaction occurred after a sharp drop in AI infrastructure stocks severely impacted the fund’s leveraged positions. Despite selling off its public equity holdings, Situational Awareness has retained its private investments, including a substantial stake in AI startup Anthropic.

What Happened

Founded by 25-year-old Leopold Aschenbrenner, Situational Awareness gained widespread attention after generating a reported 439% return for the year through June. Aschenbrenner, a former Columbia University valedictorian who joined OpenAI’s superalignment team in 2023 before being dismissed in 2024 over internal information disclosure issues, built the fund around a thesis that scaling artificial intelligence requires extensive expansion in compute, memory, semiconductors, and energy infrastructure.

At its peak, the fund managed as much as $45 billion in assets, supported by early backing from quant-trading firm Jane Street, Stripe co-founders Patrick and John Collison, and Meta executives Daniel Gross and Nat Friedman. However, public market sentiment around AI equities shifted as investors grew concerned that massive capital expenditures were not yielding immediate revenue returns. Hardest hit were several core holdings in the fund, including memory chip producers SK Hynix and Sandisk, clean energy developer Bloom Energy, and neocloud provider Nebius Group, all of which plunged by more than 30% over a one-month period.

Because Situational Awareness employed leverage—using borrowed capital to increase stock exposure—the market declines were amplified. In a July 24 letter to investors, Aschenbrenner characterized the drop as a major buying opportunity and requested fresh capital starting August 1. According to Bloomberg reporting, this capital call failed to bring in the expected commitments, prompting the sale of the public portfolio to Citadel. Following the transfer, the fund’s overall assets fell to approximately $10 billion, down from roughly $20 billion in recent months.

Key Highlights

  • Public Portfolio Sale: Situational Awareness sold the bulk of its public equity holdings to Ken Griffin’s Citadel after mounting losses.
  • Impact of Market Shift: Key holdings like SK Hynix, Sandisk, Bloom Energy, and Nebius Group dropped over 30% in a month as investors questioned immediate returns on AI capital spending.
  • Leverage Amplification: Borrowed funds exacerbated losses during the market decline, leading to an unsuccessful capital raise attempt in late July.
  • Asset Drop: Overall assets under management dropped to around $10 billion, compared to a peak of up to $45 billion and a recent level of $20 billion.
  • Private Investments Retained: The fund kept its private holdings, including a $5 billion stake in Anthropic, along with positions in chipmaker MatX and data center startup Fluidstack.

Why This Matters

The transaction highlights the volatile nature of high-leverage investment strategies focused on the public AI infrastructure sector. While public market investors expressed caution over delayed revenue generation from heavy capital outlays, institutional buyers like Citadel step in to acquire these positions. Citadel already held similar AI infrastructure bets prior to acquiring Situational Awareness’s holdings, indicating a strategy aimed at holding these assets through public market downturns.

Furthermore, the retention of private assets by Situational Awareness isolates its long-term private bets from public equity volatility. The fund’s $5 billion stake in Anthropic—which was valued at $965 billion during a May Series H round—remains a central component of its remaining portfolio alongside early-stage hardware and infrastructure startups like MatX and Fluidstack.

What to Watch Next

Market observers will be following potential developments surrounding Anthropic, which reports indicate could go public as soon as October at a potentially higher valuation than its previous $965 billion round. Additionally, private startup Fluidstack was reported in April to be in discussions to raise funds at an $18 billion valuation, which could further impact the valuation of Situational Awareness’s retained private portfolio.

Frequently Asked Questions

Did Situational Awareness close down completely?

No. While the fund sold the majority of its public stock portfolio to Citadel, it continues to operate and holds its private market investments, including a $5 billion stake in Anthropic.

Which stocks caused the largest losses for the fund?

The fund suffered major drops in public equities tied to AI infrastructure, including memory chip manufacturers SK Hynix and Sandisk, clean energy company Bloom Energy, and neocloud provider Nebius Group, all falling over 30% in a month.

Who bought the public stock portfolio?

Ken Griffin’s hedge fund, Citadel, purchased the bulk of Situational Awareness’s public stock holdings after the positions were unwound due to leverage and mounting losses.

Source: Based on reporting from TechCrunch, The Wall Street Journal, Financial Times, Bloomberg, and CNBC.