Citadel's Griffin snaps up distressed AI hedge fund's $16bn equities, stemming $3tn semiconductor rout

A spectacular rise

Launched in 2024 by then 22-year-old Leopold Aschenbrenner, a former OpenAI researcher, Situational Awareness quickly became a Silicon Valley darling. The fund raised $100 million from big names in tech that November and pursued concentrated, debt-fuelled bets on AI stocks, from chipmakers to data centre companies. By mid-2026 it had amassed more than $20 billion in assets and generated returns of more than 400% in the first six months of the year, quadrupling investor capital. Aschenbrenner’s conviction in an AI revolution drew a cult-like following, with many of his backers based in the Bay Area.

July meltdown and margin calls

That conviction ran headlong into a brutal market shift. The Philadelphia Semiconductor Index, which had doubled from the start of the year to its late-June peak, slumped 20% as AI stocks sold off. Situational Awareness’s portfolio lost 67% of its value in July, a decline exacerbated by extreme moves in core positions during the final week. Heavy leverage turned the drawdown into a liquidity crisis: lenders including Goldman Sachs demanded repayment, triggering margin calls that the fund could not meet without a fire sale.

“These dynamics are essentially similar to a bank run: vulnerability begetting more vulnerability.”

Citadel’s all-night rescue

By Wednesday morning (July 29), Citadel executives had reached out to Situational Awareness, and Ken Griffin spoke directly with Aschenbrenner. Griffin assembled senior lieutenants, co-CIO Pablo Salame, COO Gerald Beeson, head of equity quantitative research Perry Vais, and chief legal officer Shawn Fagan, and the team pulled an all-nighter to examine the fund’s trading book and assess how liquid the bets were. On Thursday, Citadel bought the bulk of the $16 billion public equities portfolio at more than a 10% discount.

“There are only a few firms that could take down this much risk.”

Markets rebound

Removing a known forced seller immediately steadied nerves. US tech stocks staged their biggest one-day rally in nearly four months, and South Korea’s chip-heavy market surged 18% on Friday (July 31). Strategists called the Citadel deal a pivotal moment that gave investors a narrative for the sell-off. “Removing a known forced seller is genuinely bullish,” said Charles-Henry Monchau, chief investment officer at Syz. Max Kettner of HSBC added: “Now we’ve found a narrative, and we can move on.” The swift reversal followed a $3 trillion semiconductor rout that had threatened to spiral further.

Battered but not broken

Aschenbrenner owned the failure in a letter to investors. “We let you down this month,” he wrote, noting the fund “came closer to permanent capital impairment than is acceptable to us.” Still, the numbers showed the scale of the earlier run: even after the 67% July plunge, the fund remained up 80% in 2026. All leverage has been removed from the portfolio, and Situational Awareness continues to hold unleveraged stakes, including a position in the still-private AI lab Anthropic. Aschenbrenner vowed to “fight another day,” writing that the underlying fundamentals of the AI sector continue to strengthen.

2026-01-01

0 %

2026-06-30

400 %

2026-07-31

80 %

Data from the article text