Citadel’s quick exit turns an AI hedge fund rescue into a fresh warning

Citadel’s quick exit turns an AI hedge fund rescue into a fresh warning
A marquee AI trade that once rode the infrastructure boom has become a test of how fast confidence can evaporate. Situational Awareness’ losses forced a retreat, and Citadel’s reported handling of the acquired shares has only sharpened the sense of a market moving at breakneck speed.

Leopold Aschenbrenner, the former OpenAI researcher who founded Situational Awareness in 2024, built the fund around the argument that AI would demand enormous investment in chips, computing power, memory and energy. The strategy was spectacularly lucrative at first: the fund returned 439% through June, according to the account of its rise and reversal.

Then AI infrastructure stocks stumbled. Positions including SK Hynix, Sandisk, Bloom Energy and Nebius fell by more than 30% over the previous month, while leverage magnified the damage. Aschenbrenner nevertheless described the selloff to investors as “one of the best buying opportunities since early last year” and sought fresh commitments.

That appeal did not produce the hoped-for capital, reports said. Citadel stepped in to buy the bulk of the public-stock holdings, leaving Situational Awareness with roughly $10 billion in assets after having recently managed about $20 billion. Axios, citing a source, described the transaction more starkly: the fund had sold “all of its public equities portfolio” to Ken Griffin’s firm.

A subsequent report says Citadel has now offloaded 80% of the portfolio it scooped up from Situational Awareness, suggesting the rescue buyer was not prepared to hold most of the battered positions for long. That claim sits uneasily beside the earlier view that Citadel’s overlapping AI infrastructure bets reflected an ability to wait out the downturn.

Situational Awareness has retained its private investments, most notably an Anthropic stake reportedly valued at $5 billion. That leaves Aschenbrenner’s fund with a very different wager: public-market AI enthusiasm has been cut back, while its remaining upside is increasingly tied to private-company valuations.

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