Citadel's Wellington fund gains 5.9% in July after distressed AI deal

Ken Griffin's Citadel turned a rival's forced liquidation into a record month, buying $16 billion of AI stocks at a 10 percent discount.

Citadel's Wellington fund rose 5.9 percent in July, lifting year-to-date returns to 12 percent, after buying roughly $16 billion of AI stocks at a 10 percent discount from the collapsing hedge fund Situational Awareness.

"This is classic Ken," a former Citadel employee who worked closely with Griffin said of the overnight purchase. "He has played this card repeatedly... few globally can do what he does."

The deal, struck in under 24 hours after Citadel approached Situational Awareness late on July 29, beat bids from trading firm Jane Street and multistrategy rival Millennium Management. Before the acquisition, Wellington was up just 0.45 percent for the month through the final week; the discounted purchase delivered gains almost immediately. Holdings including CoreWeave, SK Hynix, Bloom Energy and SanDisk rebounded the next day, with SanDisk up nearly 30 percent since Wednesday.

The purchase removed a major source of forced selling that had dragged down AI stocks, helping stabilize a sector where hedge fund leverage had reached its highest level since the 2008 financial crisis. Citadel's stock-picking fund posted a record 14.2 percent gain in July, and its Tactical Trading fund rose 11.1 percent, both up 27 percent on the year.

How a $45 billion fund became a forced seller

Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, returned more than 400 percent in the first half of 2026 on heavily leveraged bets on AI infrastructure names, peaking at $45 billion in assets under management in early July. A broad selloff then hammered its positions: SK Hynix fell nearly 50 percent from its June high, and short bets against software names such as Adobe backfired as those stocks rallied 36 percent. With roughly four times leverage, the fund bled from both sides.

Lenders including Goldman Sachs, JPMorgan and Bank of America, the fund's prime brokers, demanded more collateral as losses mounted. Aschenbrenner was forced to liquidate the bulk of his public equity book, retaining a reported $5 billion private stake in Anthropic. Total assets fell to about $10 billion from $45 billion. Millennium Management and Jane Street both examined the portfolio and passed, according to Bloomberg, before Citadel stepped in.

Citadel's crisis-hunter playbook

The purchase fits a pattern Griffin has repeated for two decades. In 2001, the day Enron filed for bankruptcy, Citadel flew a dozen executives to Houston to study the collapse and later hired several of its top analysts. In 2006 it bought the entire trading book of Amaranth Advisors after the fund blew up on natural gas bets, and in 2007 it absorbed Sowood Capital Management's credit portfolio.

The broader July selloff hit other tech-focused funds hard. Whale Rock Capital Management's flagship fund fell 21.7 percent in July, and Point72's Turion fund, focused on AI hardware and semiconductors, dropped 11.4 percent. Citadel itself had absorbed losses earlier in the year when Middle East tensions disrupted some core strategies, making the discounted acquisition a repair for its annual performance as well.

The deal also carries a crypto thread: Situational Awareness had held stakes in Bitcoin miners IREN and Riot Platforms, firms straddling AI infrastructure and crypto mining. By absorbing the portfolio, Citadel removed a major source of downward pressure on AI stocks, an outcome market participants read as stabilizing for the sector. Nvidia's earnings on Aug. 26 will be the next test of whether the AI trade holds.

This article is for informational purposes only and does not constitute investment advice.