A leveraged hedge fund run by 24-year-old Leopold Aschenbrenner sold the bulk of its stock portfolio to Ken Griffin's Citadel this week after reported margin calls. The forced sale hit shares like SanDisk before triggering a rebound in the fund's other holdings once the liquidation ended.
The biggest winners in today's stock market rally share one trait: they were the largest holdings of Situational Awareness, a hedge fund run by 24-year-old Leopold Aschenbrenner. Aschenbrenner built his reputation on a viral manifesto about artificial intelligence and his background as a former OpenAI researcher, parlaying that profile into a fund that returned more than 1,000% last year and 300% just over a month ago through highly leveraged bets on AI-related names such as chipmakers.
Leverage cuts both ways, though. The Wall Street Journal reported that Situational Awareness sold the bulk of its stock portfolio to Ken Griffin's Citadel in a fire sale this week, after rumors about margin calls and pain at the fund that had seemed hard to believe given its size.
That forced selling drove down SanDisk shares, one of the fund's biggest holdings, along with several other previously high-flying stocks. Once the market recognized the weak hand had been shaken out, buyers rushed back into the beaten-down names.
AI stocks bounce back once the selling stops
Several of the fund's other big holdings rebounded once the forced selling ended:
- Bloom Energy climbed 26.5%
- Nebius Group gained 27.1%
- CoreWeave rose 21.5%
- Core Scientific advanced 20.4%
- AMD gained 13.0%
SK Hynix was another holding. The fund's leveraged positions also affected South Korea's market, leaving margin-called traders there as well as in the US.
Fund's scale rivals Wall Street's biggest names
CNBC reported that the fund grew to as much as $45 billion at the start of July, before what could be one of the largest single hedge-fund routs on record. That scale would put Situational Awareness alongside some of the industry's biggest names: Citadel itself manages $71 billion, Bridgewater manages $78 billion, and Elliott manages $76 billion.
For comparison, Archegos collapsed at $20 billion, plus roughly $10 billion in bank losses. Long-Term Capital Management was only $4.8 billion but carried $125 billion on its balance sheet when it unwound.
The fund has not been wiped out entirely. Reports say it sold the bulk of its holdings, or nearly all according to other accounts, with Citadel likely buying at a discount to yesterday's close.
Situational Awareness also holds a reported $5 billion private stake in Anthropic, among other investments, so the unwind almost certainly wasn't a total wipeout. Even so, halving its assets would still rank the fund among the biggest hedge fund losses in history, alongside Archegos.
Sources: Investinglive, CNBC
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