Liquidated

Situational Awareness? Or a lack thereof?

Leopold Aschenbrenner’s hedge fund just sold the bulk of its stock portfolio to Citadel. On 1 July, Situational Awareness’ book value sat at US$45B. Its major positions were levered longs in Micron ($MU), Nebius ($NBIS), CoreWeave ($CRWV) and SK Hynix ($SKHY). It had returned 439% YTD and 1,000% since inception.

But the downturn in those stocks over the last month proved catastrophic. Situational Awareness was also shorting software stocks like Adobe ($ADBE), which moved higher at the same time, and delivered a double blow. 

A series of margin calls later, the fund was forced to unwind positions. By the time Citadel stepped in, roughly $10B of its book remained, bought in a single block trade. A trade that might have saved the AI rally, since it removed the market's largest forced seller and halted a cascade of AI stock declines.

The rebound was significant: U.S. tech stocks recorded their largest single-day gain in nearly four months, while South Korea's Kospi surged a record 18% on Friday after a three-day selloff.

Monday’s big Nasdaq winners included $NBIS and $CRWV, but renewed momentum boosted other AI names like Lumentum ($LITE) and Sandisk ($SNDK). On the S&P 500, Oracle ($ORCL) managed a 9% one-day rally, while Palantir ($PLTR) gained 14% after hours following a massive earnings beat.

The surprise for market participants was that the recovery in AI names came alongside a rally in software. GoDaddy ($GDDY) and CrowdStrike ($CRWD) both gained 6% in a single session, countering the seesaw narrative that’s been playing out for weeks.

The market-wide rally reinforced conviction for momentum traders. It also answers a market mystery that’s been in the air for the last few weeks: what was driving relentless selling in AI and momentum stocks? Situational Awareness' forced liquidation turned out to be a big piece of the puzzle.

This is not financial advice nor a recommendation to invest in any of the securities listed. The information presented is for general information purposes only and intended to be of a factual nature only. Past performance and forecasts are not a reliable indicator of future performance. The value of your investments can go down as well as up and you may receive back less than your original investment. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.

Samy Sriram

Markets Analyst

Samy is a markets analyst at Stake, with seven years of experience in the world of investing, working across roles in private banking, venture capital and financial media. She has a Master’s degree in Finance and Data Analytics from The University of Sydney Business School.