Rescue AI trading? Citadel takes over the portfolio of the "AI Stock God" and investment bank strategists "finally understand the reason for the plunge, now we can look forward"

Citadel's acquisition of the public equity portfolio of hedge fund Situational Awareness is widely seen by market participants as a key move in stemming the current sharp decline in AI stocks. This transaction eliminated a known forced seller, helping to stabilize the freefalling semiconductor sector.

Ken Griffin's Citadel on Thursday purchased approximately $16 billion in public equities held by Situational Awareness at a discount exceeding 10%. Multiple market participants believe this transaction prevented the fund from dumping large volumes of AI holdings, thus averting further panic selling. Following the news, US tech stocks recorded their biggest single-day gain in nearly four months, while South Korea's chip-heavy equity market rebounded by as much as 18% on Friday.

The market's rapid reversal was not solely due to the "relief" for Situational Awareness. Investors and analysts also noted that Microsoft's strong earnings release on Wednesday helped alleviate concerns over whether the scale of tech giants' investments in AI is sustainable. However, the difficulties faced by Situational Awareness provided investors with a "welcome narrative" to explain the persistent pressures on chip stocks.

Situational Awareness, founded by Leopold Aschenbrenner, had highly concentrated positions in semiconductor and AI infrastructure companies that led Wall Street's AI rally in the first half of 2026. During this period, chip manufacturers and other AI infrastructure suppliers took over market leadership from the tech sector’s hyperscale cloud providers.

However, this trade had become extremely crowded. Bank of America’s July survey showed that 82% of respondents considered “long global semiconductors” the world’s most crowded trade. From the beginning of the year to the end of June peak, the Philadelphia Semiconductor Index doubled and then pulled back nearly 20%; the Nasdaq index composed of global semiconductor stocks had lost $3 trillion in market value as of this week’s low.

Situational Awareness’s concentrated positions, combined with leveraged financing, made it especially fragile when market sentiment reversed in July. Stocks in the fund’s portfolio such as Sandisk and CoreWeave at one point fell almost 60%, and speculation over possible forced liquidations likely exacerbated the declines.

"If a highly leveraged big player starts to unwind, some market participants will know ahead of time," said Mike Zigmont, co-head of trading at Visdom Investment Group, "They will sell first to profit from it."

Max Kettner, chief multi-asset strategist at HSBC, commented that the plight of Situational Awareness provided the market with a narrative to explain the sustained sell-off in momentum stocks over the past three weeks:

"For three weeks we were confused about who was driving the second leg down. Now we have the answer, and we can move forward."

The direct impact of Citadel’s intervention was immediate. Stocks previously held by Situational Awareness led the rebound — Dutch AI infrastructure firm Nebius rebounded more than 30% from Wednesday’s low, with the fund holding 5.6% of its shares as of May; energy company Bloom Energy rose by as much as 40% during the same period, with Situational Awareness previously owning about 2% of the company.

Charles-Henry Monchau, chief investment officer at Swiss bank Syz, said, "Removing a known forced seller is essentially positive for the market."

The structure of the deal also drew attention. According to sources, Citadel purchased the stock portfolio at a discount exceeding 10%. For Citadel, this was both a bargain-buying opportunity and a move to stabilize the market.

Despite the apparent recovery in market sentiment, some analysts remain cautious about the sustainability of the rebound.

Peter Tchir, head of macro strategy at Academy Securities, warned: "Removing that seller from the market definitely helps, but there’s too much levered money in this space. I think we’ll see renewed selling pressure over the next two weeks."

He further pointed out structural issues in the market:

"We’ve run up more than we should, and the declines are steeper than they should be... The questions over whether AI spending is justified are not going away."

Meanwhile, concerns remain over whether persistently rising US Treasury yields will further suppress high-valuation tech stocks. Citadel’s move may have eliminated the most immediate “trigger” in this AI stock turmoil, but the structural pressures lurking above the market will ultimately be tested by time.