Ken Griffin's Citadel acquired the majority of AI-focused hedge fund Situational Awareness' public stock holdings in a deal estimated to be over $10 billion. This purchase came after Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, faced substantial losses and margin calls from lenders following a sharp downturn in AI stocks. The hedge fund, which at one point managed $20 billion (and reportedly as much as $45 billion) and boasted a 439% return for the year through June, was highly leveraged, making it vulnerable to the market's swings.
The deal provided a temporary reprieve for the AI sector, with the iShares Semiconductor ETF (SOXX) jumping 8.5% on Thursday. This reversed earlier losses, as the ETF had been down 29% from its peak at the end of June and fallen 11.8% in the three sessions leading up to the announcement. Some of Situational Awareness' top holdings, such as IREN, Sandisk, and CoreWeave, saw gains of over 20%. Citadel's intervention is seen by some as having removed a major seller from the market, sparking a relief rally.
Despite the sale, Situational Awareness reportedly retains private investments valued at over $10 billion, including a substantial stake in Anthropic, estimated at $5 billion. They also hold positions in companies like MatX and Fluidstack. This suggests that while their public market exposure has been significantly reduced, their focus on private frontier-model assets remains intact. The episode highlights the extreme volatility in AI stocks, which have become dominated by short-term traders and sentiment, leading to price action often divorced from fundamental value.
