What smart people are saying about the Situational Awareness stock sell-off to Citadel

Smart people in tech and investing are weighing in on the meltdown of Situational Awareness. NYSE People can't stop talking about the situation at Situational Awareness.After a meteoric rise, Leopold Aschenbrenner's AI-focused hedge fund, Situational Awareness, was forced to sell most of its publicly traded stock portfolio to Citadel following steep losses on AI-related positions in recent weeks. The fund held onto its private investments, including its stake in Anthropic.The meltdown of Situational Awareness, once sized at $20 billion, set off a wave of reactions and debate over what it said about investing in the AI space and about Aschenbrenner, a former OpenAI researcher who wrote a famous 165-page essay in 2024 about the future of AI.Here's what smart people in tech and investing are saying about the situation. Michael Dempsey, managing partner at Compound Michael Dempsey, managing partner at the New York-based investment firm Compound, said in a long post on X that Situational Awareness's "prescience was incredibly impressive and likely should still be funded and respected.""That said, anyone who has experience in public markets could somewhat easily see this was One Big Trade and so probably there should have been way better views on risk besides buying index-level puts," he added, outlining several ways he thought the hedge fund may have mismanaged its risk."We shouldn't grave dance but should instead internalize some of the learnings here and appreciate someone who basically called their shot and executed on it but (thus far) didn't land the plane." Shay Boloor, chief market strategist at Futurum Equities Shay Boloor, chief market strategist at Futurum Equities and commentator on business networks, said this was "the story of 2026.""Ken Griffin's Citadel was pushing surprise-rate-hike fears just days before the AI trade collapsed and forced 4x-levered Leopold Aschenbrenner's Situational Awareness to unload its book near the lows. Citadel then reportedly bought most of those assets at significantly lower prices knowing that if sentiment deteriorated enough the fund could be forced to sell which makes the entire sequence look absolutely ruthless," he wrote on X."This is why the stock market is the greatest game on Earth." Martin Shkreli, investor Martin Shkreli, an investor and former pharmaceutical executive convicted of fraud, appeared on the daily technology show TPBN on Thursday and discussed what led up to Situational Awareness's meltdown. He said it demonstrated how Wall Street works."It's the saddest, most Machiavellian thing. But he sort of had to blow up. There's no other ending. Because of the leverage level," he said.He also said he thinks Aschenbrenner is "brilliant" and could still have a future in investing despite this being an "extremely humbling moment.""He'll be back and successful," he said. Tim Culpan, former Bloomberg columnist Tim Culpan, a former Bloomberg columnist, said the "meltdown" at Situational Awareness "shows the difference between intelligence and wisdom.""Even if his investment thesis is spot on in the long-term, leveraged positions remove wiggle room to ride out the massive sell offs that inevitably occur in a hot market," he wrote in LinkedIn. Read next Kelsey is a senior reporter for Business Insider, where she covers business and tech news as well as stories about travel, luxury, and consulting.Her feature story "Disaster at 18,200 feet" received awards from the New York Press Club and the North American Travel Journalists Association, as well as honorable mention from the Society of American Travel Writers. It was also included on Longreads' and Pocket's best of 2022 lists. She has also received an American Journalism Online Award for her coverage on missing and murdered Indigenous people in Wyoming.She's appeared on CBS, NPR, NBC, and other outlets to discuss her work. She previously worked on the world news desk at the BBC in London and received a master's in journalism from Northwestern University.She can be reached by email at kvlamis@businessinsider.com or via the encrypted-messaging app Signal @kelseyv.21.Popular storiesDisaster on Denali: Inside a 1,000-foot fall on America's highest peakThrifting is more popular than ever. It's also never been worse.Rolex wouldn't service the vintage watch my mom inherited. Watchmakers say it happens all the time.A tiny, invasive bug and the climate crisis are changing how guitars are made, and shifting the course of music historyThe tourism free-for-all is overGovernment-run boarding schools were founded to 'civilize' Native Americans. Hundreds of dead children remain buried in the schoolyard graves.Meet the Texas minister who helps fly dozens of women to New Mexico every month to get abortionsPeople are flocking to Colorado for the great outdoors, but the air pollution is so bad, it's forcing many to stay insideInside Kabul: An aid worker reveals the devastating chaos that erupted during the US exit from Afghanistan Hedge Funds Smart People Say