Ken Griffin’s Citadel capitalized on forced selling by a leveraged AI fund, buying distressed semiconductor positions at steep discounts.
Citadel Advisors purchased distressed AI semiconductor positions from Situational Awareness after the fund’s 67% July collapse, acquiring assets at over 10% discounts. The trades totaled $4 billion as markets stabilized, with Citadel shedding 80% of the acquired portfolio risk through nearly 100 block trades.
Situational Awareness, an AI-focused hedge fund, saw its $16 billion public-equity book unwound due to heavy leverage and a sharp July sell-off in semiconductor stocks. The fund’s forced liquidation created a buying opportunity for Citadel, which identified the leverage-driven sell-off as distinct from fundamental decline.
The move highlights Citadel’s strategy of exploiting forced selling, turning margin-call-driven market dislocations into profitable entry points. The AI trade’s crowded positioning and leverage amplified the July downturn’s impact on leveraged funds.