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Limited seats available, first come first served. Let us join together for the appointment with sustainability! [Click to register] Goldman Sachs upgraded CoreWeave's rating, and multiple analysts voiced support for fundamentals, as the panic over "AI capital expenditure peaking" somewhat subsided. The Philadelphia Semiconductor Index ended its eight-day losing streak with a 1.6% gain. Previously, "AI stock god" Aschenbrenner once again fell into severe losses, with his heavily weighted seven stocks averaging an 18.3% decline.
After a new round of violent washout, the AI sector staged a technical rebound on Monday, but whether this rebound represents a trend reversal or merely a brief respite remains a subject of deep disagreement in the market. On Monday, October 19, the Philadelphia Semiconductor Index ended its eight-day losing streak, at one point rallying more than 3% intraday before closing up 1.6%. Goldman Sachs that day upgraded cloud computing company CoreWeave's rating from "neutral" to "buy," and multiple Wall Street analysts also successively voiced support for fundamentals, as the panic sentiment over "AI capital expenditure peaking" that had once pervaded the market somewhat dissipated.
The backdrop of this rebound is strikingly similar to the deleveraging round triggered by the Situational Awareness fund's blow-up several months ago. According to reports, UBS trading desk trader Torsten Sippel pointed out in a report last week that last week's market movements were highly similar to the "AI stock god" event — both involved forced liquidation of crowded positions rather than fundamentally driven systemic selling. However, as the rebound emerged, analysts cautioned that hedge fund gross exposure remains at elevated levels, deleveraging risks have not been fully cleared, and whether this rebound is a true bottom or a brief respite remains a matter of disagreement in the market.
The "AI stock god" gets blown up again
This is already the second time in less than half a year that Aschenbrenner has stumbled on AI bets. In July of this year, Aschenbrenner's Situational Awareness fund suffered losses of up to tens of billions of dollars due to a sharp correction in the AI sector, setting a record for the largest loss by a single hedge fund in history, ultimately forcing it to significantly reduce leverage and sell most of its public market positions to Citadel. In a letter to investors, Aschenbrenner said he would "fight another day" and promised to "learn the necessary lessons." However, just weeks later, he made a comeback.
According to reports, in September Aschenbrenner began rebuilding the core positions that had previously blown up, covering targets including AMD, Intel, SK Hynix, SanDisk, and CoreWeave, except that he switched from the previously high-leverage model using total return swaps with major investment banks like Goldman Sachs to flexible options structures, aiming to cap maximum losses at the premium already paid. The results were equally disheartening. Since September 8, six of the seven stocks he heavily weighted suffered sharp declines: CoreWeave fell 37.4%, SK Hynix dropped 25.8%, SanDisk declined 23.8%, DRAM fell 22.9%, Bloom Energy dropped 18.1%, Intel declined 9.4%, with only AMD recording a 9.1% gain, and the seven targets averaging an 18.3% decline. The Market Ear called this event "Leopold Lows 2.0." DRAM prices have fallen back to the lows seen during the last blow-up. CoreWeave's RSI has also retreated to levels seen at that time. And the CoreWeave November-expiry $95 strike call options he established in early September have fallen from a high of $18 to just about $1.
Position clearing and technical oversold: conditions for a rebound are converging
From Goldman Sachs data, the structural characteristics of this round of selling precisely set the stage for Monday's rebound. Hedge funds have net sold global AI stocks for five consecutive trading days. According to Goldman Sachs statistics, the cumulative net buying of AI stocks since 2025 has been completely erased. Global AI stocks recorded the second-largest net selling scale in nearly a year during this period. Hedge funds' net allocation to global AI stocks dropped from a June peak of 31.7% to 26.1%, sitting at the 49th percentile of the past year; the long-short ratio fell from 4.34 to 3.27, only at the 7th percentile of the past year.
The Market Ear analysis pointed out that this selling was mainly long reductions. Last week's global net selling flow reached -2.1 standard deviations, with the ratio of long selling to short selling at about 3 to 1, indicating the market is in a phase of actively reducing risk exposure. Once forced selling gradually exhausts, the technical support logic begins to stand out. The Philadelphia Semiconductor Index has touched the lower bound of its trading range while approaching longer-cycle trend support lines, with oversold levels reaching extremes. At the same time, panic sentiment in the options market also concentrated its release this week, with VXSMH (the semiconductor volatility index) surging sharply. But analysis suggests that according to the rule of "things reversing at extremes," the moment of extreme market panic is often the bottom. Notably, passive unwinding of options also amplified the previous decline to some extent. Delta hedge positions that market makers purchased when establishing call options were forced to close as option values shrank, creating additional selling pressure on the underlying stocks and intensifying downward momentum.
Wall Street analysts: fundamentals are not broken
The reason the rebound could occur on Monday owes much to intensive endorsements from analysts. Goldman Sachs upgraded CoreWeave from "neutral" to "buy," with analyst Gabriela Borges acknowledging reasonable doubts about the company's financing capacity but believing that after the sharp decline, valuations have become attractive. In her research note, she pointed out that even if CoreWeave's blended debt cost rises by 100 to 200 basis points, it would not breach this range, effectively setting a ceiling on the upward movement of the weighted average cost of capital, keeping the equity return structure intact. Goldman Sachs lowered its target price from $139 to $106, but this still implies more than 40% upside from Friday's closing price; according to Bloomberg statistics, the current average analyst target price for CoreWeave is $135.23, implying about 120% upside. Star tech analyst Dan Ives compared this sell-off to a "SaaS doomsday panic" moment in AI infrastructure, citing CoreWeave's backlog of approximately $104 billion at the end of Q2, emphasizing that customer commitments on the demand side have not wavered, and expecting a fundamentals-driven uptrend to continue after the panic subsides. Moor Insights & Strategy founder Patrick Moorhead stated bluntly: I think this is just another round of panic — people are looking for reasons to sell, not reasons to buy. From the perspective of total capital expenditure, UBS Wealth Management CIO raised the 2026 global AI capex forecast to $900 billion, a year-over-year increase of 84%; for 2027, it further rises to $1.2 trillion, up 33% year-over-year, directly triggered by comprehensive cost increases recently across the AI server supply chain. Monday's most obvious counterattack was precisely in the stocks that fell the hardest last week. On Monday, SanDisk closed up 5.5%, SK Hynix ADR closed up 4.6%, Micron closed up 3%, and Intel closed up 2.4%.
Beyond the rebound: deleveraging is far from over
However, this rebound is not without concerns. Multiple analysts warned that the market structure remains fragile. UBS's Sippel pointed out that although hedge fund net exposure has fallen to the 30th percentile of the five-year history, gross exposure remains above the 90th percentile, leaving room for further deleveraging. He characterized the recent market as "fragile rather than outright bearish," believing risks are being redistributed. CoreWeave's credit issues have not fully dissipated. Last week its bond prices fell to levels that typically signal financial distress, and the cost of bond default protection at one point climbed to an all-time high intraday. Although Goldman Sachs has upgraded the rating, the stock at one point rose 7.4% intraday on Monday but ultimately still closed down 0.4%. Sippel noted that market concerns about the sustainability of AI infrastructure financing structures have formed a pricing logic independent of hardware demand, and strong fundamentals from ASML and TSMC have failed to effectively ease these doubts. Bank of America strategist Michael Hartnett warned that as investors seek to avoid volatility from rising interest rates, U.S. midterm elections, and AI-themed trades, risk aversion could dominate the market in the coming weeks. In the coming week, tech giants including Meta and Tesla will successively disclose earnings, and the true elasticity of AI capital expenditure will face more direct data verification. For this rebound, the market consensus may be: positions have been cleared, but confirmation of a bottom still requires more definitive answers from fundamentals.
Risk warnings and disclaimers
Markets carry risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this article is at one's own risk.
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