Citadel unwinds 80% of AI portfolio risk in $4 billion block trades

Citadel executed nearly 100 block trades worth over $4 billion to cut 80% of risk from the Situational Awareness portfolio.

Citadel unwound more than 80 percent of the risk from Leopold Aschenbrenner's Situational Awareness portfolio, executing nearly 100 block trades totaling over $4 billion, Ken Griffin said in a Friday client letter.

Griffin said the hedge fund completed the trades but did not identify the securities sold, their prices, or the exposure still on its books, according to the letter obtained by CNBC. The disclosure provides the first broad measure of how quickly Citadel reduced the risk acquired from the AI-focused hedge fund.

Citadel bought most of Situational Awareness's public-equity portfolio in late July after losses and margin pressure forced the fund to seek liquidity. The rapid auction also attracted Jane Street and Millennium, with Citadel reportedly acquiring the assets at a discount of about 10 percent. Situational Awareness had generated a 439 percent net return through June 30 before leveraged AI infrastructure positions and software shorts moved against it in July, with the fund using as much as 400 percent leverage.

The unwind carries direct implications for the AI infrastructure complex. First-quarter filings showed Situational Awareness held long positions in CoreWeave, Core Scientific, Applied Digital, IREN, Riot Platforms and CleanSpark, alongside large put positions on semiconductor and technology companies. The block trades could pressure these names as the market absorbs the selling.

A 439% Return, Then a 400% Leverage Collapse

Situational Awareness's strategy centered on public positions tied to data centers, power and semiconductors. The fund's rapid rise — a 439 percent net return through June — drew institutional attention before leveraged AI infrastructure positions and software shorts moved against it in July. The forced unwind that followed brought Citadel, Jane Street and Millennium into a competitive auction for the portfolio.

The auction dynamics matter for understanding the discount Citadel secured. With multiple bidders competing for a portfolio that had to be sold quickly, the roughly 10 percent discount reflected the urgency of the situation rather than a fundamental deterioration in the underlying assets. Citadel's ability to acquire the portfolio at that price — and then unwind more than 80 percent of the risk within weeks — suggests the fund saw value in the dislocation.

Citadel's Wellington fund gained 5.9 percent in July, its strongest month since 2022, taking its 2026 return through July to 12 percent. The performance followed the portfolio acquisition and a late-July rebound across several AI-linked equities. The block trades themselves may have contributed to the rebound by removing overhang from the market.

Private holdings, including a multibillion-dollar Anthropic stake, were separate from the public-equity sale and remain outside the scope of the block trades. This separation means the AI infrastructure names that traded in the public market — CoreWeave, Core Scientific, Applied Digital, IREN, Riot Platforms and CleanSpark — absorbed the full weight of the unwind.

The speed and scale of Citadel's de-risking — more than 80 percent of aggregate risk unwound within roughly three weeks of the acquisition — suggests the fund moved quickly to contain exposure to a portfolio built on extreme leverage. For the broader market, the block trades represent a significant supply of AI infrastructure shares hitting the market, potentially weighing on valuations in a sector already under pressure. The remaining exposure on Citadel's books, which the firm has not disclosed, will determine whether further selling pressure emerges in the weeks ahead.

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