Just to jump in: Citadel buying this portfolio says nothing about how Citadel feels about the stocks. It's the bread and butter of large HFT hedge funds; if you see someone that has to sell stock, you leverage the fact that you can buy all of it to get a discount versus the asset value. Reports are saying that Citadel was able to buy the portfolio for ~10% under the market value, all at once. That's a no-brainer because you both get a discount and avoid driving the price down by buying small pieces over the course of a week.;
If I were a betting man, I'd bet that Citadel was also selling to Situation Awareness while they were on the way up. At some point, SA had juiced their stock prices so much that no "rational" investors (those that have a view of the stock based on some amount of fundamentals) would be on the other side of the trade. It's retail investors, bandwagon investors, and Citadel-caliber funds. This situation (over-leveraged company blows up due to some volatility) happens all the time in commodities trading, which is where Citadel started.
This fund returned 47% in its first 6m and over 400% prior to the downturn.
I don't understand how the investors didn't realize this was going to blow up. Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper.
When something is inevitable and there is a large enough position, this makes adversarial attacks likely. Every small drop causes an amplified amount of pain to the investor which causes them to liquidate positions furthering the decline. SA doesn't have the history or relationships yet to endure margin calls.
I don't see the edge these companies have when they're just going long a very particular position, namely anything related to AI. Long term value in finance is made in a couple of ways. For instance, relationships & being able to source deals (lots of PE firms), short term trading infrastructure and knowledge (Renaissance), capital and clout to make favorable deals (Buffet), etc. Even then the skills are fleeting as employees leave taking knowledge and companies raise money to compete.
Buying Nvidia on leverage is not a long term strategy. Especially when all your investments are common stock and obvious.
> Buying Nvidia on leverage is not a long term strategy.
The whole country of South Korea is long SK Hynix and Samsung, with insane level of leverage. That won’t be a happy ending. People talk about past bubbles as if it was a good thing long term, but that will be millions of people losing their savings, homes, decades of austerity for countries to recover
>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper.
Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up in the 2 and 3 previous filings so they had exposure to some of that run up, and looking at the filings further back they had some very concentrated exposure to INTC in a half year period where the stock went up about 200%
Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged.
Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to dump it into the market which would likely have been far worse.
I was answering his point that 400% returns are impossible without leverage, and my argument was that they were in the right stocks at the right time to achieve those kinds of returns without leverage. Since a lot of their portfolio is/was options without strikes or durations listed and the exact dates of their buys/sells is unknown it's not possible (AFAIK) to reconstruct their P&L exactly but it seems plausible to me that, given the stocks they were concentrated in and the quarters they start reporting those positions, that they could have gotten 400% returns in a year without leverage. If I were an LP reading their filings saying that (for example) they held 25% of the fund in Intel during a half year period where it went up 200%, plus some other similar holdings, resulting in overall 400% returns I wouldn't automatically conclude they were levered.
Or perhaps this was more of an attempt to lock in some profits while still riding it higher? It seems most of his puts were in the chip stocks while his portfolio was more focused on "next phase" datacenter/infra stocks.
>This fund returned 47% in its first 6m and over 400% prior to the downturn.
>Returns like that are not asymmetrical and can only be produced with leverage
This is simply untrue. Just because the path to doing so is much more clear in hindsight doesn't mean it wasn't possible.
Sandisk is still up 110.82% in the last 6 months, and that's after a drawdown that's now approaching 50% from peak. Over the last year, they're up 2730%, and again, this is after the drawdown. Zero leverage.
The skill in the stock market, and the value of any kind of investment fund, is producing good returns over an actual long-term period. YOLO-ing once before imploding in one of the biggest bull markets ever can be done by any gambling degenerate out there.
I don't disagree at all with what you're saying, but it has nothing to do with what I said, which is strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage.
That's not at all what I said. What I said had nothing to do with the mechanics driving broader market behavior.
What I said was strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage. That's a demonstrably false assertion.
If you bought Sandisk, $SNDK, not options but the actual underlying equity, with no margin, just fully purchased the position with cash, you're up 110% if you bought six months ago (down from over 200%, but 110% in 6 months is still enormous), and you're up over 2700% if you bought a year ago.
This article is stating the obvious that is written in many different places (except the ETF angle) while sounding like its some kind of expert being ignored. I would presume AI is afoot.
Stopped writing the comment, went and clicked the logo, yup a personalized AI reporting service.
Author here. There is absolutely no AI used in any of the writing I do. We use AI to track news and better understand global and economic developments.
I think the collapse of SA is very simple (as long as I'm not wrong about it of course hehe).
SA weren't geniuses, they weren't sophisticated. They just did the same thing everyone else did, all in on semi-conductor, AI and memory positions. They got great returns because 1) everyone got great returns and 2) they were leveraged through their ears. In fact, not only they weren't geniuses, they were pretty bad at risk management, so bad that the first mild drawdown triggered margin calls on their over-leveraged bets and they couldn't cover them.
TLDR: SA didn't have alpha, they just looked good through over-leveraged beta and got caught
Even in the optimistic case where SA did have alpha, the position sizing was way out of whack. Based on the volatility of the stocks they were buying, the Kelly Criterion meant you'd need to expect a 900% annual return on the stock before leverage to justify being 4x levered.
What guys like Leopold either don't understand or understand but ignore is that being right directionally and being right on market timing are two different skillsets. When you've juiced a stock by 800%, the existence of alpha pales in comparison to your vulnerability to the stock market.
The public book went to 0 and LPs lost everything. The 80% number is a result of blending the Anthropic stake (+620% YTD, 25% of NAV) and the public book (-100%, 75% of NAV) = +80% YTD
Michael Burry's substack answers this in his articles over the last week. It's along the lines of there are a number of market players that are taking on similar position in the market. These market players use leverage. Because of how many players there are, and the different levels of leverage involved, if the market goes against these crowded strategies there tends to be a sharp unwind against these funds. People know this dynamic exist, and so when the unwind slows down they jump right back in there as the forced selling stops and re-levering occurs again.
It's a good reminder that there are many ways you might interpret Citadel's intervention...from everything I've read, it seems that everyone wants to believe this is a bullish position on AI.
Just to jump in: Citadel buying this portfolio says nothing about how Citadel feels about the stocks. It's the bread and butter of large HFT hedge funds; if you see someone that has to sell stock, you leverage the fact that you can buy all of it to get a discount versus the asset value. Reports are saying that Citadel was able to buy the portfolio for ~10% under the market value, all at once. That's a no-brainer because you both get a discount and avoid driving the price down by buying small pieces over the course of a week.;
If I were a betting man, I'd bet that Citadel was also selling to Situation Awareness while they were on the way up. At some point, SA had juiced their stock prices so much that no "rational" investors (those that have a view of the stock based on some amount of fundamentals) would be on the other side of the trade. It's retail investors, bandwagon investors, and Citadel-caliber funds. This situation (over-leveraged company blows up due to some volatility) happens all the time in commodities trading, which is where Citadel started.
This fund returned 47% in its first 6m and over 400% prior to the downturn.
I don't understand how the investors didn't realize this was going to blow up. Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper.
When something is inevitable and there is a large enough position, this makes adversarial attacks likely. Every small drop causes an amplified amount of pain to the investor which causes them to liquidate positions furthering the decline. SA doesn't have the history or relationships yet to endure margin calls.
I don't see the edge these companies have when they're just going long a very particular position, namely anything related to AI. Long term value in finance is made in a couple of ways. For instance, relationships & being able to source deals (lots of PE firms), short term trading infrastructure and knowledge (Renaissance), capital and clout to make favorable deals (Buffet), etc. Even then the skills are fleeting as employees leave taking knowledge and companies raise money to compete.
Buying Nvidia on leverage is not a long term strategy. Especially when all your investments are common stock and obvious.
> Buying Nvidia on leverage is not a long term strategy.
The whole country of South Korea is long SK Hynix and Samsung, with insane level of leverage. That won’t be a happy ending. People talk about past bubbles as if it was a good thing long term, but that will be millions of people losing their savings, homes, decades of austerity for countries to recover
They thought it was gonna be different this time.
>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper.
Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up in the 2 and 3 previous filings so they had exposure to some of that run up, and looking at the filings further back they had some very concentrated exposure to INTC in a half year period where the stock went up about 200%
Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged.
Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to dump it into the market which would likely have been far worse.
Aschenbrenner is 25 years old. How many market upsets has he seen in his adult life?
I was answering his point that 400% returns are impossible without leverage, and my argument was that they were in the right stocks at the right time to achieve those kinds of returns without leverage. Since a lot of their portfolio is/was options without strikes or durations listed and the exact dates of their buys/sells is unknown it's not possible (AFAIK) to reconstruct their P&L exactly but it seems plausible to me that, given the stocks they were concentrated in and the quarters they start reporting those positions, that they could have gotten 400% returns in a year without leverage. If I were an LP reading their filings saying that (for example) they held 25% of the fund in Intel during a half year period where it went up 200%, plus some other similar holdings, resulting in overall 400% returns I wouldn't automatically conclude they were levered.
Looking at their 13f filing (filed in may 2026), they had $8 billion of leveraged put options.
Interesting - I guess at least some attempt at hedging given that they held puts in some of the same stocks they were long on.
https://whalewisdom.com/filer/situational-awareness-lp
Or perhaps this was more of an attempt to lock in some profits while still riding it higher? It seems most of his puts were in the chip stocks while his portfolio was more focused on "next phase" datacenter/infra stocks.
>This fund returned 47% in its first 6m and over 400% prior to the downturn.
>Returns like that are not asymmetrical and can only be produced with leverage
This is simply untrue. Just because the path to doing so is much more clear in hindsight doesn't mean it wasn't possible.
Sandisk is still up 110.82% in the last 6 months, and that's after a drawdown that's now approaching 50% from peak. Over the last year, they're up 2730%, and again, this is after the drawdown. Zero leverage.
The skill in the stock market, and the value of any kind of investment fund, is producing good returns over an actual long-term period. YOLO-ing once before imploding in one of the biggest bull markets ever can be done by any gambling degenerate out there.
I don't disagree at all with what you're saying, but it has nothing to do with what I said, which is strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage.
Uhhh.. you think this isn't driven by options trading? Which is, by definition, leverage.
That's not at all what I said. What I said had nothing to do with the mechanics driving broader market behavior.
What I said was strictly a refutation of the assertion that it's only possible to achieve a 47% return in 6 months or 400%+ return in ~2 years with leverage. That's a demonstrably false assertion.
If you bought Sandisk, $SNDK, not options but the actual underlying equity, with no margin, just fully purchased the position with cash, you're up 110% if you bought six months ago (down from over 200%, but 110% in 6 months is still enormous), and you're up over 2700% if you bought a year ago.
This article is stating the obvious that is written in many different places (except the ETF angle) while sounding like its some kind of expert being ignored. I would presume AI is afoot.
Stopped writing the comment, went and clicked the logo, yup a personalized AI reporting service.
Author here. There is absolutely no AI used in any of the writing I do. We use AI to track news and better understand global and economic developments.
"The forces that destroyed SA were also what generated its 4×+ return"...yes, that is what levrage means? And it goes both ways.
The interesting part what this article states: SA was essentialy a thematic ETF without any hedging to buffer downside, and got margin called.
I think the collapse of SA is very simple (as long as I'm not wrong about it of course hehe).
SA weren't geniuses, they weren't sophisticated. They just did the same thing everyone else did, all in on semi-conductor, AI and memory positions. They got great returns because 1) everyone got great returns and 2) they were leveraged through their ears. In fact, not only they weren't geniuses, they were pretty bad at risk management, so bad that the first mild drawdown triggered margin calls on their over-leveraged bets and they couldn't cover them.
TLDR: SA didn't have alpha, they just looked good through over-leveraged beta and got caught
Even in the optimistic case where SA did have alpha, the position sizing was way out of whack. Based on the volatility of the stocks they were buying, the Kelly Criterion meant you'd need to expect a 900% annual return on the stock before leverage to justify being 4x levered.
What guys like Leopold either don't understand or understand but ignore is that being right directionally and being right on market timing are two different skillsets. When you've juiced a stock by 800%, the existence of alpha pales in comparison to your vulnerability to the stock market.
They were the alpha. Leopold called the boom in 2025 and returned 200% in 2025.
He unfortunately got caught with his pants down.
Shoot, I called the boom in 2020 and returned 700% over the last six years. Where’s my fund? :P
I mean, so many people also went in on the boom, that's why it's a boom. Leopold somehow got it 100% right and _still_ managed to go bust
That was just leveraged beta.
"Impending"? Has anyone looked at the Business section, lately?
My first thought as well. My second was the lack of situational awareness.
All comments here are written as if Situational Awareness blew up, but it seems like it didn't and is up 80% YTD https://nitter.net/tbpn/status/2083226453509030285
All the stuff that it was forced to sell to Citadel is also up ~10%-30% since the sale
The public book went to 0 and LPs lost everything. The 80% number is a result of blending the Anthropic stake (+620% YTD, 25% of NAV) and the public book (-100%, 75% of NAV) = +80% YTD
> All the stuff that it was forced to sell to Citadel is also up ~10%-30% since the sale
and Citidel took it all at a multiple billion dollar discount to the prior close
How does it actually work under the hood?
Michael Burry's substack answers this in his articles over the last week. It's along the lines of there are a number of market players that are taking on similar position in the market. These market players use leverage. Because of how many players there are, and the different levels of leverage involved, if the market goes against these crowded strategies there tends to be a sharp unwind against these funds. People know this dynamic exist, and so when the unwind slows down they jump right back in there as the forced selling stops and re-levering occurs again.
How does what work?
You'll have to clarify -- do you mean the fund, or our hypothesis on reflexivity and the value of AI assets?
It's a good reminder that there are many ways you might interpret Citadel's intervention...from everything I've read, it seems that everyone wants to believe this is a bullish position on AI.