A trader was seen on the floor of the New York Stock Exchange. Yuki Iwamura / Associated Press
The AI-centric hedge fund Situational Awareness, which experienced rapid growth, has reportedly sold off the majority of its stock holdings to Citadel, the investment firm founded by Ken Griffin, following significant financial losses, according to sources close to the situation.
This event represents a sharp decline for Situational, helmed by Leopold Aschenbrenner, a former OpenAI employee. Within just two years of its inception, the firm had accumulated over $20 billion in assets under management, making it one of the quickest-growing hedge funds in recent history. At just in his mid-20s, Aschenbrenner was regarded by many as a visionary in AI investment, with other investors keenly observing his firm's strategic moves, especially its high-stakes leveraged investments.
As the market turned against stocks related to artificial intelligence, Situational faced mounting pressure to secure liquidity either through asset sales or fresh capital commitments. This was necessary to fulfill margin calls from its lenders, as reported by insiders.
The firm's public investments span across various companies integral to the AI supply chain, including memory chip manufacturers SK Hynix and Sandisk, fuel-cell producer Bloom Energy, and cloud computing provider Nebius Group. Over the last month, the shares of these companies have seen a steep decline due to investor concerns over high capital expenditures and increasing borrowing costs impacting the AI and tech sectors.
Following the news of Situational's asset liquidation, the share prices of companies in its portfolio rose on Thursday.
Situational had utilized borrowed funds from banks to boost its stock investments. Citadel's acquisition focused solely on the portion of the portfolio that was financed through these loans, while the firm retained ownership of the remaining investments that were backed by its clients' capital, according to the sources.
