What a Hedge Fund’s Implosion Says About the A.I. Trade

Andrew here. We told you on Thursday to watch for fallout from Situational Awareness, the high-flying hedge fund that bet heavily — and with enormous leverage — on the artificial intelligence boom.

Well, after a wave of margin calls, the fund was forced into a fire sale on Thursday, offloading its public stock portfolio to Ken Griffin’s Citadel. It is a playbook Griffin has executed repeatedly during market distress — remember Melvin Capital and the GameStop frenzy in 2021?

We’ve got a lot more below, but the sheer speed of the implosion has Wall Street searching for parallels. Some have compared the Situational Awareness woes to the market ructions in 1998 that led to the collapse of Long-Term Capital Management (LTCM), or to the failure of Archegos Capital Management.

I reached out to Roger Lowenstein, author of the book “When Genius Failed,” to ask about the LTCM comparison.

Article source: https://www.nytimes.com/2026/07/31/business/dealbook/situational-awareness-ai-hedge-fund.html