How an 8-person fund called "Situational Awareness" blew up $24B, sold its whole portfolio, and triggered a market drop
u/valbolt ·
Reddit — r/ValueInvesting
· July 30, 2026 at 18:16
· ⬆ 146 pts
· 💬 67 comments
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Summary
The post describes how an 8-person fund, “Situational Awareness,” was forced to liquidate its entire public portfolio after levered long positions in AI hardware (SK Hynix, Nebius, SanDisk, Micron, CoreWeave) crashed 35%+ while short software names (Adobe) rallied.
Author u/valbolt implies the forced selling caused the Wednesday 1,100-point Dow drop and that chips bounced once the liquidation cleared. He highlights the fund manager’s letter calling this “the best opportunity since early 2025” and inviting new capital on Aug 1.
Quality assessment: This is primarily a narrative/opinion post with anecdotal market timing. It lacks rigorous data on fund positions, leverage multiples, or detailed valuation. More speculation than well-researched DD.
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Killed from both sides: long the AI buildout (SK Hynix, Nebius, SanDisk, Micron, CoreWeave - all down 35%+), short software names like Adobe that ripped higher.
**The part that should scare you:** forced sellers don’t care about your cost basis. They were forced to sell off their entire public portfolio in one shot. Wednesday’s 1,100-point Dow drop was probably partly this book getting liquidated into no bid. Notice how chips bounced today the moment it cleared?
His letter says the fund was “not immune” but calls this the best opportunity since early 2025 - and actually invites investors to add capital Aug. 1. a bold move!
The fund’s forced liquidation of high-beta AI memory/storage names (including MU) caused a sharp selloff, and prices bounced immediately after the selling stopped. The temporary, non-fundamental selling pressure creates a short-term oversold bounce opportunity for names like Micron, especially if the AI buildout thesis remains intact (as commenters note new models like Fable 5/Opus 5/Sol are impressive). Buy MU on the post-liquidation dip, expecting a mean-reversion bounce as forced selling clears, supported by still-strong AI demand drivers. Leverage overhang from other funds; further macro weakness; potential further margin calls if chip stocks resume decline; fund manager’s “add capital” plea may signal deeper trouble.