AI hedge fund Situational Awareness may have sold its public portfolio, but it still has its Anthropic shares

The high-flying hedge fund Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, has undergone a significant contraction. Following a period of intense volatility and steep losses, the fund has offloaded the majority of its public equity holdings to Ken Griffin’s Citadel, according to reports from The Wall Street Journal.

This development marks a humbling turn for Aschenbrenner, a 25-year-old prodigy who quickly became a polarizing figure in the financial and AI sectors. Known for his "scarily smart" reputation and brash investment style, the German-born former OpenAI staffer entered the hedge fund arena in 2024 with no prior professional trading experience.

A Meteoric Rise and a Sharp Correction

Aschenbrenner’s investment thesis—which posits that the scaling of artificial intelligence will necessitate a massive, unprecedented build-out of energy, compute, memory, and semiconductor infrastructure—initially yielded spectacular results. Through June, the fund reportedly delivered a staggering 439% return, propelling its assets under management to a peak of approximately $45 billion.

However, the tide turned rapidly as the broader AI infrastructure market faced a correction. Investors grew increasingly skeptical that the massive capital expenditures poured into the sector would translate into near-term revenue. As these stocks faltered, the fund’s reliance on leverage—using borrowed capital to amplify positions—backfired, leading to significant losses.

"The fund’s losses were amplified by leverage, a common hedge fund strategy of using borrowed money to buy stocks."

Despite the downturn, Aschenbrenner remained defiant. In a late July letter to investors, he characterized the market selloff as one of the most attractive buying opportunities seen since early 2023, urging clients to inject fresh capital. Unfortunately for the fund, that appeal failed to generate the necessary momentum.

The Citadel Connection

The portfolio liquidation saw the fund’s assets drop from roughly $20 billion in recent months to approximately $10 billion following the sale to Citadel. The assets offloaded included several high-conviction bets that had plummeted by over 30% in the last month, such as:

• Memory chip manufacturers: Including SK Hynix and Sandisk.
• Clean energy infrastructure: Specifically Bloom Energy.
• Cloud computing: The neocloud provider Nebius Group.

Citadel’s acquisition of these assets follows a familiar playbook for Ken Griffin’s firm, which frequently steps in to acquire high-potential assets when leveraged players are forced to unwind. Notably, Citadel already held positions in several of the same AI infrastructure plays, signaling that Griffin remains bullish on the sector's long-term recovery.

The Private Market "Ace in the Hole"

While the public portfolio has been largely liquidated, Aschenbrenner still holds significant private assets that could serve as a lifeline. Most notably, Situational Awareness retains a stake in Anthropic, currently valued at approximately $5 billion.

Key Private Portfolio Assets:

1. Anthropic: With a valuation of roughly $965 billion as of its May Series H round, the company is widely expected to pursue an IPO as early as October, potentially at an even higher valuation. 2. MatX: The specialized chipmaker remains a core part of the fund’s private holdings. 3. Fluidstack: The AI data center startup, which was reportedly eyeing an $18 billion valuation during funding talks earlier this spring.

The potential windfall from these private holdings could prove critical in offsetting the losses sustained in the public markets. The fund’s early backers, which include prominent names like Jane Street, Stripe co-founders Patrick and John Collison, and Meta executives Daniel Gross and Nat Friedman, will be watching closely to see if these private bets can salvage the fund's performance.

Aschenbrenner’s journey from OpenAI’s "superalignment" team—where he worked under Ilya Sutskever and Jan Leike—to the helm of a multi-billion dollar hedge fund has been nothing short of volatile. Whether his long-term thesis on AI infrastructure will eventually be vindicated by his remaining private assets remains the central question for his investors.