Situational Awareness sells $16B portfolio as AI stocks rebound

The Nasdaq-100 surged 6.7% in its biggest single-day gain in months after Citadel acquired the bulk of Situational Awareness' $16 billion stock portfolio in a forced sale.

"This looks like a clearing event that could mark a bottom for the AI trade," Jim Cramer said on CNBC.

Sandisk, Nebius Group and CoreWeave each surged more than 20%, while Micron Technology gained about 15%. The rally snapped a five-day losing streak for chip stocks, which had dragged the Nasdaq-100 10% below its early June peak. The fund's largest disclosed holdings at the end of the first quarter included all four stocks.

The implosion of a fund that generated a 439% return from January through June before leverage turned a bad month into a forced liquidation has Wall Street debating whether the AI trade's worst is over. The 30-year Treasury yield remained above 5.2%, a 17-year high, after Fed Chairman Kevin Warsh held rates steady despite three of 12 voting members dissenting in favor of a quarter-point hike — the first three-way dissent since September 2016.

How a $45 Billion AI Bet Unraveled

Situational Awareness, founded about two years ago by former OpenAI researcher Leopold Aschenbrenner, amassed more than $20 billion in assets before swelling to $45 billion by July, according to CNBC. The fund's July investor letter, reported by the Financial Times, called it "a particularly good time to add funds."

Days later, margin calls forced the liquidation of every public stock position. Bank of America, Goldman Sachs and JPMorgan Chase were the brokers involved, CNBC reported. Millennium Management and Jane Street passed on the portfolio before Ken Griffin's Citadel stepped in to buy it, according to Bloomberg.

The fund's disclosed holdings had grown nearly 22 times in a year, reaching $5.52 billion across 29 stocks in its latest 13F filing. Mining and data center stocks made up $1.38 billion of that total — a quarter of the book — reflecting Aschenbrenner's thesis that power constraints, not chip supply, would be the bottleneck for artificial intelligence. Core Scientific was the largest mining position at $418.7 million, followed by IREN at $328.6 million and Applied Digital at $278 million.

AI Stocks Surge as Forced Selling Ends

The block trade's completion coincided with a sharp reversal in AI-related equities. Microsoft rose about 15% after reporting strong quarterly results, providing a fundamental catalyst for the sector's rebound. Arm Holdings also rallied after posting solid first-quarter results and issuing upbeat guidance.

J.P. Morgan analyst Harlan Sur said the "AGI merchant silicon CPU narrative continues to firm up just a few months after the Arm Everywhere event."

Elsewhere, Fair Isaac tumbled after third-quarter revenue missed consensus estimates, while MarketAxess surged after agreeing to a buyout from Intercontinental Exchange at a 33% premium. The mixed moves showed the rotation underway beneath the headline index.

The fund is not shutting down. It retains significant private-company investments, including an Anthropic stake valued at about $5 billion. Anthropic filed confidential paperwork for an initial public offering on June 1.

For investors, the question is whether the forced liquidation of the most aggressive AI bet on Wall Street represents a genuine capitulation bottom or merely a pause. The answer may depend on whether the Fed's next move is a cut or a hike — a question that divided the central bank's own voting members for the first time since September 2016.

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