Key points
- Stake rose 50% in the second quarter
- B&W is building power plants for Applied Digital
- B&W reported its breakout quarter after Citadel took the book
- Gross margin halved getting there
Leopold Aschenbrenner’s fund owned $469 million of Applied Digital (APLD) and a much smaller stake in the company building power plants for its AI campuses. During the second quarter, it increased that second position, Babcock & Wilcox (BW), by almost 50 percent. Six weeks after the quarter ended, B&W reported sharply higher revenue and a return to quarterly profit. By then, Citadel had bought the book.
Situational Awareness LP’s BW holding rose from 1,353,900 shares on March 31 to 2,027,451 on June 30, an increase of 673,551. At the June 30 close of $14.10, the stake was worth $28.6 million: the fourth smallest of 23 stock holdings and roughly 0.14 percent of the $20.24 billion portfolio. Its connection to Applied Digital is what makes it worth a closer look.
SanDisk (SNDK) and Micron (MU) together accounted for 55 percent of that portfolio. Aschenbrenner wasn’t skipping chips to buy power. He bought the chips too. He just also bought this.
The other end of the same project
Babcock & Wilcox has made industrial boilers since George Babcock and Stephen Wilcox patented a water-tube steam generator in Providence, Rhode Island, two years after the Civil War ended. It's headquartered in Akron now and employs about 1,650 people. For most of the last decade it lost money, and on a trailing basis it still does.
What changed is a program the company calls FastPower, which sells generation instead of the emissions-control equipment B&W is known for. On March 4th it received full notice to proceed on a $2.4 billion design-build agreement. The job is 1.2 gigawatts of capacity, four natural gas-fired boilers of 300 megawatts each, for a company called Base Electron. Base Electron is an independent power producer backed by Applied Digital. Applied Digital's own team founded it to develop generation for the company's data center campuses. Wes Cummins, Applied Digital's chairman and CEO, called it "dedicated, reliable generation" meant to support a long-term campus strategy.
So the two holdings are one project seen from either end. Aschenbrenner's fund owned the data center operator and the contractor pouring its power plants, and it bought more of both in the same three months. Applied Digital went from 13,478,438 shares to 15,384,616. By itself the Babcock & Wilcox line is a rounding error in a $20 billion book. Sitting next to the Applied Digital line, it's the same wager placed twice.
The two companies are tied together on the balance sheet as well. B&W issued customer warrants to Base Electron and to Applied Digital itself, one batch in November 2025 and another in February 2026. The liability covering both holders was $8.3 million at the end of 2025 and $136.9 million on June 30. Most of that came in the first quarter, from the February grant and from a rising share price, and the second quarter's revaluation moved back in B&W's favor. So Applied Digital holds paper in its own contractor.
That award is also what people are quoting when they cite the backlog. B&W reported $2.6 billion on August 10th, up 533 percent from a year earlier, and Base Electron is the great majority of it. Backlog counts work still to be performed, so it's a number that falls as the job gets built.
The report he missed
That August 10th report is the first hard evidence that the Base Electron work converts into revenue at scale. Sales came in at $319.7 million against $138.9 million a year earlier, a 130 percent increase, and Base Electron was $100.7 million of it. The company earned $14.3 million after losing $58.5 million in the same quarter of 2025. Adjusted EBITDA rose 57 percent to $21.8 million, and B&W raised the top of its full-year target to $105 million. The release also disclosed another gigawatt of Siemens Energy steam turbines on order, for a data center project it hasn't named.
What it doesn't yet show is whether the work pays well. Cost of operations was $273.1 million against that revenue, so gross margin landed near 15 percent where a year earlier it was 30 percent, and adjusted EBITDA margin went from 10 percent to under 7. Building power plants pays thinner than what Kenneth Young, B&W's chairman and chief executive, called the "higher-margin Global Parts and Services business" the company's lived on. The June profit had help elsewhere as well: interest expense fell by $6.0 million, tax expense by $5.1 million, and the fair value of those customer warrants moved $5.9 million in B&W's favor. Adjusted net income was $9.1 million.
The first half reads stranger. B&W lost $62.7 million over the six months and still reported adjusted net income of $14.7 million. The bridge is $70.9 million of customer warrants plus $6.5 million of stock appreciation rights issued back in 2018, both of which got more expensive because the share price went up. So the headline loss is largely the accounting cost of a rally that has since reversed.
The stock jumped 42 percent after hours on the report and then gave almost all of it back. It opened August 11th at $11.86 against a prior close of $8.88. It traded as high as $12.08. It closed at $9.19, up three and a half percent on the day. It's fallen through most of the weeks since, and the September 10th close of $7.17 is 67 percent below the $22.03 it touched on May 15th and 49 percent below the mark on Aschenbrenner's own filing. Needham started coverage on August 31st with a buy rating and a $20 target, close to three times the September 10 close.
Citadel opened discussions on July 29th and bought the book at the end of that month. On August 21st Ken Griffin told clients the firm had closed out more than 80 percent of the aggregate risk in what it acquired. Citadel's June 30 filing already carried $5 million of Babcock & Wilcox common stock before any of that happened, which we went through when the filing landed. The results were published after Aschenbrenner had handed over the book.
What he's buying now
Situational Awareness has started buying again in the weeks since, and the shape of it is options. CNBC's David Faber reported on September 11th that the fund has spent about a week buying options, hundreds of millions of dollars of premium, on AI names including several it already held. Premium is money actually paid out, so those figures carry a weight the option values on a quarterly filing don't.
Which leaves Babcock & Wilcox where the public record leaves it. The 2,027,451 shares are 1.4 percent of the 149 million outstanding, well under the 5 percent level that draws its own filings. The filing for June 30 establishes the position at quarter-end. The next quarterly snapshot covers September 30 and gets published about six weeks later, and it won't reconstruct the trades in between. The rest of that filing, including the $8.46 billion of options positions that disappeared from it, is worth reading alongside this one.
