On Wednesday, Ken Griffin’s hedge fund Citadel acquired over $10 billion in AI stocks from Situational Awareness, a hedge fund that faced margin calls. This acquisition removed a significant seller of AI stocks from the market and has spurred a surge in investor confidence, leading to gains in many AI stocks. The iShares Semiconductor ETF (NASDAQ: SOXX), which includes popular AI holdings, jumped 8.5% after previously being down 29% from its peak at the end of June.
The deal comes after Situational Awareness, founded by 24-year-old Leopold Aschenbrenner, encountered liquidity issues due to the drop in AI stock prices. Following Citadel’s purchase, many of Situational Awareness’s key holdings, including CoreWeave and IREN, saw increases of over 20%. It’s noteworthy that this purchase marked a shift for Griffin, who had previously dismissed AI technology as “garbage.”
Investors are advised to brace for continued volatility within the AI sector, as recent movements have been influenced heavily by short-term trading behaviors rather than underlying fundamentals. The SOXX ETF had fallen 11.8% earlier in the week before Citadel’s intervention sparked the current rally.
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