Ken Griffin’s Citadel now owns the leveraged stock book of what was, three weeks ago, one of the most closely watched investment vehicles in America. Situational Awareness, the AI-focused hedge fund built by 25-year-old former OpenAI researcher Leopold Aschenbrenner, peaked at roughly $45 billion at the start of July. By Thursday it held about $10 billion.

The fund was forced to sell all of its public stock holdings after margin calls from its prime brokers. Citadel reached a deal to buy the publicly traded assets — among them SK Hynix and CoreWeave — at below-market prices. Bank of America, Goldman Sachs and JPMorgan Chase had been working with the fund to meet margin requirements ahead of the sale. The transaction was reportedly assembled inside 24 hours.

Both legs of the trade broke at once

The mechanics matter more than the personality here. Aschenbrenner was long AI infrastructure and short software — a paired bet that the buildout would enrich chipmakers and data center operators while pressuring application companies.

Then the AI infrastructure names collapsed and the software shorts rallied simultaneously. Nebius Group, SanDisk, Micron and CoreWeave — the fund’s top disclosed positions as of the first quarter — each shed more than 35% of their value. At the same time, software stocks like Adobe that served as the short leg went up, so the hedges provided no protection. Longs and shorts lost money together.

Reports put the fund’s leverage as high as 400%. As the portfolio’s value dropped, the equity cushion shrank and the prime brokers demanded more collateral.

Wall Street veterans were not surprised. Critics noted that Aschenbrenner had no money management experience before launching the fund in July 2024, and that his early work was at the collapsed crypto firm FTX. One Wall Street coach quoted by CNBC said the blow-up was widely seen as a question of when rather than whether. Another market strategist put it plainly: traders get overleveraged chasing outsized returns, and without proper risk management, this is the outcome.

The pedigree and the thesis

Aschenbrenner was born in Germany, enrolled at Columbia at 15, and graduated valedictorian at 19 with a degree in economics and mathematics-statistics. He joined OpenAI’s superalignment team in 2023 and was dismissed a year later over what the company described as an improper disclosure of internal information.

His 2024 essay — 165 pages arguing that increasingly capable AI would demand a vast expansion of semiconductors, memory, data centers and electricity generation — became required reading across Silicon Valley and formed the fund’s entire investment case. Early backers included Stripe co-founders Patrick and John Collison, former GitHub CEO Nat Friedman, and investor Daniel Gross.

He did not back away as losses mounted. In a July 24 letter to investors, he described the selloff as one of the best buying opportunities since early last year and invited clients to commit fresh capital beginning August 1. The commitments did not materialize.

What’s left

Situational Awareness will continue as a private investment firm. Its roughly $5 billion private stake in Anthropic was not part of the Citadel sale, and the fund retains it.

The unwind also helps explain this month’s chip market. Forced liquidation of a leveraged book that size moves prices independent of any view on the underlying businesses — and the Philadelphia Semiconductor index just posted its worst month since 2008. Some on Wall Street read Thursday’s forced selling as a clearing event rather than a verdict on the AI trade.

That distinction is the open question. The thesis Aschenbrenner wrote in 2024 may still prove correct. What failed was the leverage structure built on top of it, and the assumption that a hedge would hold when the market turned on both sides of the book at once.

JBizNews Desk | New York

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