Ken Griffin’s Citadel has reportedly acquired a large portion of the publicly traded stock portfolio held by Situational Awareness, the hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, following steep losses across AI-related investments in July.
The transaction comes after Situational Awareness reportedly suffered a 67% decline during July, forcing the fund to reduce leveraged positions and raise liquidity. Despite the sharp monthly drawdown, the fund was reportedly still up approximately 80% for the year.
Citadel Acquires Discounted Public Stock Portfolio
According to reports from the Financial Times and other outlets, Citadel purchased a significant portion of Situational Awareness’s public equity portfolio at discounted valuations following the selloff.
The transaction appears to have been part of a broader effort by the hedge fund to reduce leverage and strengthen its liquidity position after several of its largest AI infrastructure investments declined sharply.
Situational Awareness had reportedly approached existing investors and lenders seeking additional capital while also offering certain portfolio assets to investors.
Reuters reported that the fund retained approximately $10 billion in public and private investments following the restructuring, including its stake in AI company Anthropic.
Situational Awareness Reportedly Fell 67% in July
The Wall Street Journal reported that Situational Awareness declined approximately 67% during July, citing an investor letter.
The scale of the decline is particularly striking because the fund had previously delivered extraordinary gains.
The Financial Times had reported that Situational Awareness was up approximately 439% through June. Even after July’s severe losses, the fund was reportedly still approximately 80% higher for the year.
The reversal illustrates the risks associated with highly concentrated and leveraged exposure to the AI infrastructure investment theme.
Fund Faced Pressure to Raise Liquidity
Reports indicated that Situational Awareness needed additional cash as its leveraged public-equity positions moved sharply against it.
The Wall Street Journal reported that the fund needed liquidity to meet lender margin requirements.
Reuters also reported that leverage played a role in the portfolio restructuring but said it could not determine whether formal margin calls had been issued before the asset sale.
Situational Awareness reportedly explored several ways to generate liquidity, including raising fresh capital from investors and selling portfolio holdings.
$3.5 Billion Anthropic Sale Was Reportedly Considered
One of the largest potential transactions involved Situational Awareness’s private investment in Anthropic.
The fund reportedly reached an agreement late Wednesday to sell approximately $3.5 billion worth of Anthropic shares to an investor group led by Greenoaks and Sequoia Capital.
However, according to the Journal, Situational Awareness withdrew from the transaction the following morning.
Reuters subsequently reported that Anthropic remained among the approximately $10 billion in assets retained by the fund.
The decision suggests Situational Awareness may have prioritized selling liquid public equities rather than disposing of one of its major private AI investments.
AI Infrastructure Stocks Suffered Heavy July Losses
Several companies associated with Aschenbrenner’s AI infrastructure investment thesis experienced substantial declines during July.
Sandisk fell approximately 44% during the month, despite rebounding 26% during Thursday’s session.
CoreWeave declined nearly 26%, while Bloom Energy dropped approximately 32%.
Regulatory filings showed that Situational Awareness held direct equity positions in all three companies as of March 31.
These investments reflected Aschenbrenner’s broader thesis that rapid advances in artificial intelligence would generate enormous demand for semiconductors, data centers, memory, electricity and computing infrastructure.
Bitcoin Mining Stocks Were Also Part of the Portfolio
Situational Awareness also had substantial exposure to Bitcoin mining companies increasingly expanding into AI and high-performance computing.
Its Securities and Exchange Commission filing showed approximately $1.11 billion invested across seven Bitcoin mining companies as of March 31.
Those holdings included Iren, Core Scientific, Riot Platforms and CleanSpark.
Bitcoin miners have increasingly attracted AI infrastructure investors because they already control valuable assets such as large electricity connections, data-center facilities and access to significant computing capacity.
Some miners have consequently begun repurposing infrastructure originally built for Bitcoin mining toward AI and high-performance computing workloads.
It remains unclear whether these positions were included in the portfolio acquired by Citadel or whether Situational Awareness continues to hold some or all of them.
Aschenbrenner Built the Fund Around an AI Infrastructure Thesis
Situational Awareness takes its name from Aschenbrenner’s influential 2024 essay series, “Situational Awareness: The Decade Ahead.”
The essays argued that artificial general intelligence could emerge as early as 2027 and that increasingly capable AI systems would require an extraordinary expansion of computing and electricity infrastructure.
That thesis became the foundation of the hedge fund’s investment strategy.
Instead of focusing primarily on AI software companies, Situational Awareness concentrated heavily on businesses positioned to supply the physical infrastructure behind the AI boom.
The strategy generated exceptional returns during the first half of the year but also created significant concentration risk when AI infrastructure stocks reversed sharply.
Citadel Deal Highlights the Risks Behind the AI Infrastructure Trade
The reported portfolio sale represents a major test for one of the market’s most aggressive AI investment strategies.
Situational Awareness’s extraordinary gains through June demonstrated how powerful concentrated exposure to AI infrastructure could be during a rising market.
Its subsequent 67% July decline demonstrates the opposite side of that strategy: leverage and concentrated positions can transform a market correction into a severe liquidity event.
If reports that the fund retained approximately $10 billion in assets are accurate, Situational Awareness remains a substantial investment operation despite the restructuring.
The larger question is whether July’s AI selloff represents a temporary correction or a more fundamental reassessment of valuations across the infrastructure companies expected to power the next generation of artificial intelligence.
