Citadel Unwinds 80% of Situational Awareness Portfolio

Situational Awareness, an artificial-intelligence-focused hedge fund, suffered steep losses after a concentrated bet on AI infrastructure was hit by a market pullback. Citadel, the investment firm led by Ken Griffin, subsequently took over the portfolio. The episode has drawn attention because it highlights the liquidity and risk-management challenges that can emerge when a highly concentrated thematic strategy is unwound during a sharp reversal.

Citadel moved quickly to reduce the inherited exposure, executing more than $4 billion of block trades over the past three weeks. According to a letter from Griffin to investors, the firm has now unwound more than 80% of the positions acquired from Situational Awareness. The rapid disposal spread the risk across buyers and sharply reduced Citadel’s exposure to the AI-heavy portfolio.