Ken Griffin, founder and CEO of multinational hedge fund Citadel.
Ken Griffin, founder and CEO of multinational hedge fund Citadel, speaks during the 29th annual Milken Institute Global Conference at the Beverly Hilton in Beverly Hills, California on May 5, 2026. Patrick T. Fallon/AFP

KEY POINTS

  • Situational Awareness was forced to liquidate its public assets to Kenneth Griffin's Citadel at a steep discount following margin calls from major prime brokers.
  • Goldman Sachs data shows hedge fund leverage surged to record levels in 2026, underscoring broader concerns about AI-related market exposure.

The dramatic rise and fall of Situational Awareness, a $24 billion hedge fund founded by 25-year-old Leopold Aschenbrenner after his departure from OpenAI, is indicative of the shift away from indiscriminate investor enthusiasm for AI-related bets toward a more disciplined, returns-focused approach.

The San Francisco-based fund issued an emergency call to its rivals after Goldman Sachs and JPMorgan Chase demanded additional collateral from hedge funds with AI-related exposure, the Financial Times reported on Tuesday.

After posting a 439% return for the first half of 2026, according to an investor letter seen by the Financial Times, Situational Awareness found itself scrambling to meet margin calls just weeks later. Its largest holdings—Nebius Group, Sandisk, Micron, and CoreWeave—each fell more than 35% during July, while its short positions against enterprise software companies like Adobe compounded its losses when software stocks unexpectedly rallied.

Following late-night negotiations, Kenneth Griffin's Citadel agreed to provide cash in exchange for acquiring the fund's publicly traded assets at a steep discount, according to the New York Times.

Aschenbrenner became one of the most watched figures in AI investing after publishing a series of prescient essays in 2024 arguing that the impending AI buildout would require massive investments in chips, memory, data centers, and power infrastructure. That served as Situational Awareness' investment thesis and powered the fund's remarkable ascent. Within 18 months, the former OpenAI researcher with no professional investing track record was managing roughly $24 billion, more than Bill Ackman's Pershing Square, which is one of the world's most prominent hedge funds.

The explosive growth of Situational Awareness reflected Wall Street's willingness to aggressively fund AI-related opportunities, while its abrupt unwind showed how quickly market sentiment and financing conditions can change. Goldman Sachs noted that the buildup in gross leverage among hedge funds during the first five months of 2026 was the largest cumulative increase on record since 2016, when it began tracking the data, while roughly 16% of the firm's prime brokerage book was directly exposed to AI memory stocks.

OpenAI