Embattled hedge fund Situational Awareness invests $400M in chip startup Source Foundry

AI-focused hedge fund Situational Awareness invested $400 million in Source Foundry, bringing its total backing of the Stanford-founded chip manufacturing startup to $500 million. The move comes after steep losses in AI infrastructure stocks forced the fund to sell most of its public portfolio to Citadel, cutting reported assets under management from $20 billion to $10 billion.

The deal suggests investors still see strategic value in chip manufacturing startups even as public AI infrastructure names cool off. Situational Awareness is concentrating risk around private AI supply-chain bets, a strategy that could pay off if demand for faster, cheaper chip production keeps rising but may deepen volatility if the sector resets further.