Situational Awareness Citadel sale follows leveraged AI stock losses

Leopold Aschenbrenner’s Situational Awareness Citadel sale followed a fast reversal in the AI infrastructure trade: the hedge fund sold nearly all of its publicly traded stock portfolio to Ken Griffin’s Citadel after losses and bank margin calls, according to reports from the Financial Times, CNBC and the Wall Street Journal. The sale price was not disclosed, but CNBC reported the fund had reached $45 billion in assets before the setback.

The episode matters for AI investors because the problem was less the broad thesis than the financing behind it. Aschenbrenner had used borrowed money to bet on companies tied to AI buildout, including chips, memory, data centers and power infrastructure. When AI-linked public stocks fell, the leverage turned a market drawdown into a forced sale.

What happened to Situational Awareness and Citadel?

Situational Awareness sold almost its entire public stock portfolio to Citadel after its leveraged positions came under pressure, according to the reports. Falling shares in AI-related companies, including SK Hynix, and margin calls from banks pushed the fund into an emergency transaction.

The timing was severe. The Financial Times reported that Aschenbrenner had recently told investors the fund was up 439% for the first half of the year and had asked for new capital by August 1. Within days, the fund was selling its public portfolio. Some of the affected stocks later recovered, according to the reporting, but the margin pressure had already forced action.

Aschenbrenner is retaining private holdings, including a stake in Anthropic, according to the reports. The value of those holdings was not disclosed, and the reports did not say how much investor capital remains in the fund after the public-stock sale.

A large AI bet with a small team

CNBC reported that Situational Awareness had only eight employees, four of them focused on investing, despite its reported peak asset base of $45 billion. That is an unusually thin operating structure for a fund managing positions large enough to trigger broader attention when they move.

Aschenbrenner, who is in his mid-20s, had no prior trading experience before launching the fund, according to the reports. His public profile rose after he published “Situational Awareness,” an essay arguing that rapid AI progress would drive a large buildout of compute and related infrastructure.

Before starting the hedge fund, Aschenbrenner worked at the FTX Future Fund, the philanthropic arm of Sam Bankman-Fried’s crypto exchange, beginning in February 2022. He left before FTX collapsed. In 2023, he joined OpenAI’s Superalignment team and was fired in April 2024 over an alleged information leak. Aschenbrenner disputed OpenAI’s account, saying he had shared a largely harmless document with three outside researchers and had previously raised security concerns at the company.

Why leverage changed the outcome

The investment case behind Situational Awareness was that advanced AI systems would require more chips, memory, data centers and electricity. Spending in those areas has continued, but investors have also started questioning whether the returns will justify the capital intensity and financing costs.

Leverage made that debate immediate. Borrowed money can increase gains when a trade works, but it also raises the risk that lenders demand more collateral or force sales when prices move against the fund. In this case, the reports indicate that margin calls, not a formal abandonment of the AI buildout thesis, drove the public-portfolio sale.

The result is a cautionary data point for the AI trade. A fund can be directionally aligned with a durable technology cycle and still fail on timing, position sizing and financing structure.

This story draws on original reporting from The Decoder.