*Plain-text copy of the page at https://wowverybadthingarehappeningnow.com/. What each figure claims, and what it does not claim, is set out in https://wowverybadthingarehappeningnow.com/llms.txt.*

16 OCTOBER 2026 · DAY 229 OF THE HORMUZ CLOSURE

# The Unwind

Hedge funds borrowed to buy into the AI boom. Now on paper they have already lost huge sums of money. The selling to repay their lenders has barely begun.

HOW THE MONEY WAS LOST

## The AI infra stocks these funds have been betting on crashed twice: in July, then again in October

Change in share price since 30 June 2026, per cent. Tap a line or a name to pick it out.

30 June – 29 July The first crash 2 – 16 October The second +10 0 −10 −20 −30 −40 −50 −60 30 Jun 31 Jul 31 Aug 30 Sep 16 Oct S&P 500 +2% Micron −24% Bloom Energy −27% Seagate −34% CoreWeave −38% Nebius −40% SanDisk −43% SK hynix −52% Kioxia −55%

SK hynix −52% Kioxia −55% SanDisk −43% Micron −24% Bloom Energy −27% CoreWeave −38% Nebius −40% Seagate −34% S&P 500 +2%

July: the crowd pulls back

Twenty AI-hardware stocks whose daily moves had a correlation of 0.45 over the previous year moved down together at 0.72. Situational Awareness lost two-thirds and sold its book to Citadel. Jane Street lost about $15bn.

October: fundamental repricing

Correlation falls back to 0.48. The second fall was a more fundamental repricing of the stocks themselves. The funds that survived July dumped again while the S&P 500 barely moved.

Source: Yahoo Finance daily closes to 16 October 2026. SK hynix in Seoul, Kioxia in Tokyo. Correlations: Who Is Dead on Paper v8, section 1.

## The method, in three steps

All public filings. Dead simple.

1 · Collect the filings

Every US fund manager with more than $100mn in shares must report its holdings to the SEC each quarter, on Form 13F. 1,528 hedge-fund managers filed for 30 June.

2 · Price them today, with no borrowing

Each fund's most recent filed holdings are priced as of 16 October market conditions. Even if no fund borrowed a cent, 1 is dead, 7 are walking dead and 45 are wounded.

3 · Add the average borrowing

No filings show any fund's leverage, so the SEC's own average for equity hedge funds is used: 2.7 times long, 1.9 times short. At that level 138 funds are dead or walking dead.

Dead means a fund has lost all its money; walking dead, 40 per cent or more; wounded, 20 per cent or more. The leverage control in section 1 of The Unwind gives the count at any level from 1× to 4×.

IN BRIEF

**A small number of hedge funds financed the AI boom with money borrowed from a small number of banks. That money has already been lost.**

- At the average leverage that equity hedge funds report to the SEC, 138 of them are dead or walking dead.

- To bring their borrowing back to the level their lenders allowed in June, the funds must sell $155bn of stock. That is more than LTCM's whole balance sheet when it failed.

This is the largest forced sale of borrowed equity on record, and it has only just begun.

## 1. The money has already been lost

**The losses have already happened. The prices of 16 October show them.**

The 30 June 13F filings of 1,528 hedge-fund managers, priced at 16 October, show the damage. Taking the holdings as filed, with no borrowing, 1 fund is dead and 7 are walking dead.

A typical equity hedge fund holds positions 4.6 times the size of its capital, 2.7 times long and 1.9 times short, according to the SEC's Form PF statistics. At that leverage, 4 funds are dead, 134 are walking dead and 111 more are wounded.

Goldman Sachs says hedge-fund leverage rose more in the first half of 2026 than in any period since its records began in 2016. The true counts are probably higher.

**No filing discloses a fund's leverage. The count below changes with the leverage chosen.**

**The funds hit hardest are among the best known in the trade.**

| Fund | 13F book, 30 June | Loss at 2.68× | At 2.68× |

|---|---|---|---|

| Lone Pine | $16.4 bn | 78% | 78% |

| Whale Rock | $12.5 bn | 73% | 73% |

| RA Capital | $11.5 bn | 64% | 64% |

| Perceptive | $6.5 bn | 59% | 59% |

| Avoro | $11.1 bn | 58% | 58% |

| RTW | $11.7 bn | 44% | 44% |

| Peconic | $7.5 bn | 86% | 86% |

| OakTop | $2.4 bn | 94% | 94% |

Situational Awareness, the best-known fund in the trade, grew from $250mn to a gross book of $45bn in 18 months, borrowing four times its money. It collapsed in three weeks in July.

**Results by fund**

## 2. The funds must sell, and they will sell what still has buyers

**Losses raise a fund's leverage. Its lenders then make it sell until leverage is back where it was.**

A fund at 2.7 times leverage that loses $1 must sell $1.70 of stock to return to 2.7 times. Across all the funds with losses, the total is $155bn.

**The stocks that have already fallen cannot absorb the selling.**

Dycom, MasTec, Quanta Services and Core Scientific build and run data centres. The funds must sell Dycom shares equal to 67 per cent of all Dycom shares traded in the past two weeks. For MasTec the figure is 43 per cent, for Quanta Services 37 per cent and for Core Scientific 32 per cent. In these four stocks, the funds' forced sales now set the price.

**So the funds sell the shares that can still be sold, including the largest in the market.**

VARA alone held call options on $4.66bn of Alphabet, $4.35bn of Amazon and $4.04bn of Nvidia. Nvidia peaked on 6 October and has since fallen 10.5 per cent.

## 3. The lenders are all in the same boat

**Four banks lend to the failing funds: Morgan Stanley, Goldman Sachs, Bank of America and JPMorgan. They lend to the rest of the market too.**

Each fund lists its prime brokers in its Form ADV filing. Morgan Stanley is prime broker to 23 of the funds that are wounded or worse, and Goldman to 22.

The same banks lend to Jane Street, Wall Street's largest trading firm, which lost about $15bn in July, its first losing month since 2016. JPMorgan cut its lending to Jane Street in early September.

## 4. The money that built the data centres is now losing

**Part of the demand for AI computing was paid for with profits from trading AI stocks. Those profits are now losses.**

During its record first half, Jane Street signed about $19bn of contracts for AI computing, $6bn of it with CoreWeave and about $13bn with Crusoe. CoreWeave's shares have fallen 38 per cent since June.

## 5. Nothing is in place to stop it

**The concurrent oil shock rules out the rescue that ended each recent financial panic.**

If the Federal Reserve cut rates or bought bonds now, it would do so while oil and freight prices are rising. The firms that are buying intend to resell quickly at a profit. That's not market support.

## 6. Where this stands in history

**Each of these shocks has happened before, but never all at once.**

| 1973–74 | An oil embargo came on top of a crash in the Nifty Fifty growth stocks. The S&P 500 fell 48 per cent from its January 1973 peak. |

|---|---|

| 1998 | LTCM held $129bn of assets on $4.7bn of equity. The New York Fed brought together 14 banks, which put in $3.6bn. |

| 2000–02 | The Nasdaq fell 16 per cent while the S&P 500 stayed within 0.4 per cent of its peak. The S&P then fell 49 per cent. |

| 2021 | Archegos, a family office, had about $36bn of exposure. Its banks lost more than $10bn. |

| 2026 | All of these at once. |

## 7. What happens next, and when

**The selling has barely begun. It runs from the smallest AI stocks to the largest, then into government bonds.**

The rest we will see, on these dates:

Monday 19 October. The markets open.

Monday 16 November. Every fund's 13F for 30 September is due.

November. Investors give notice to leave their funds at 31 December.

Thursday 31 December. The withdrawals are paid.