Pinned Tweet
AI market colour:
TLDR; Two paths forwards:
1. If stocks keep falling - HFs still hold big positions on both sides so they'd have to dump their longs and buy back their shorts at the same time. Messy messy situation.
2. If stocks turnaround higher - HFs have a large amount of AI have to buy those back = short squeeze territory.
So the current situation with AI stocks is that hedgies have pushed overall net exposure to the lowest level all year (latest GS PB data) with the L/S ratio for AI names near its lows.
Basically, that means there's a lot of room for them to get more long (cope, but true).
Across the entire book, HFs have mostly shorted against their longs rather than completely selling them, with short sales running at ~5x long buys in October MTD. That said, Tech has been hit from both sides with the record selling coming from long sales AND new shorts. FWIW, I don’t think there’s reason to panic since I highly doubt many funds out there are short the entire AI theme.
A lot of the longs are now concentrated in Mag 7 which is now a record ~22% of US net exposure. So in essence, the trade has been long stable megacaps, short the rest of the AI supply chain.
Funds don’t really have much room to add new long risk right now with gross already fairly elevated, so the way back for semis is by them covering shorts. A lot of the shorts recently have been put on in memory, photonics and the neoclouds, as well as Asian semis, so upside headroom is probably most significant in those areas.
Time will tell. Would not try to time bottoms here.
TLDR; Two paths forwards:
1. If stocks keep falling - HFs still hold big positions on both sides so they'd have to dump their longs and buy back their shorts at the same time. Messy messy situation.
2. If stocks turnaround higher - HFs have a large amount of AI have to buy those back = short squeeze territory.
So the current situation with AI stocks is that hedgies have pushed overall net exposure to the lowest level all year (latest GS PB data) with the L/S ratio for AI names near its lows.
Basically, that means there's a lot of room for them to get more long (cope, but true).
Across the entire book, HFs have mostly shorted against their longs rather than completely selling them, with short sales running at ~5x long buys in October MTD. That said, Tech has been hit from both sides with the record selling coming from long sales AND new shorts. FWIW, I don’t think there’s reason to panic since I highly doubt many funds out there are short the entire AI theme.
A lot of the longs are now concentrated in Mag 7 which is now a record ~22% of US net exposure. So in essence, the trade has been long stable megacaps, short the rest of the AI supply chain.
Funds don’t really have much room to add new long risk right now with gross already fairly elevated, so the way back for semis is by them covering shorts. A lot of the shorts recently have been put on in memory, photonics and the neoclouds, as well as Asian semis, so upside headroom is probably most significant in those areas.
Time will tell. Would not try to time bottoms here.
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Paradis retweeted
I find it significant that the most AI-pilled people I know use AI for basically everything…except for writing
It’s remarkably consistent. Why? Because to write is to think. And outsourcing your critical thinking to AI is intellectual suicide
It’s remarkably consistent. Why? Because to write is to think. And outsourcing your critical thinking to AI is intellectual suicide
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LMAO
Weekend hack: HackerTube. I was annoyed with YouTube's recommendations so I had Claude filter down 43M comments over 20 years of HN to 6,454 videos that keep being recommended. *Significantly* better viewing experience, ~2 hours with Opus 5.5:
hackertube.org
- Excellent (state is kept in local browser session)
- Thumbnail is a representative frame from middle of the video instead of the super duper A/B test hyper-optimized user uploads
- Underlying data from the comment analysis as one zip file, point your Claude at it and ask for your own version
- HackerTube Longs ✊
A bit more on the process:
I use Claude Code (desktop app for Mac), Opus 5.5 on Medium effort as my default. I only talk to Claude and have it do everything, the only "manual work" I helped with in tandem was in the browser (reminiscent of MenuGen): 1) I had to create some kind of API key from Google Cloud UI to query YouTube for video metadata, 2) I booted up a VPS box for serving and 3) I bought the domain name. Once the box was up I gave Claude the IP and told it update, secure, harden, deploy and optimize the code, and it did the whole thing.
Many awesome projects that would have normally taken weeks/months even can now be few-shotted for breakfast. What else are we not thinking of.
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Paradis retweeted
Things I recommend people read to more deeply study technology cycles and their market connections.
Carlota Perez’s theory of technological revolutions and Pástor and Veronesi’s research on technology and stock prices, and general-purpose technology economics.
Carlota Perez’s theory of technological revolutions and Pástor and Veronesi’s research on technology and stock prices, and general-purpose technology economics.
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Insights from GS Prime Brokerage:
1. Info Tech was the most net-bought sector this week, driven mainly by short covers while long buys remain relatively weak.
2. Info Tech stocks are still heavily net sold MTD. This week's net-buying through to Thursday represents just ~40% of e previous 3 weeks.
3. Mag 7 stocks were net sold from Tuesday to Friday last week, highlighting risk-off sentiment.
4. Semis & Semi Equip (long buys), Software (short covers), and Tech ETFs (short covers) were the most net-bought Tech subsectors this week.
5. Goldman Sachs:
"While the directional engine of this market remains intact (token demand + GW/DC build-outs), the market has become much more discerning around the linearity of this story beyond CY27, pressuring multiples across the board until visibility improves, while investors are struggling to find names to rotate into outside of Semis/AI that are less susceptible to daily AI disruption volatility – cue names like IBM, AAPL, SPOT, V/MA, EBAY, LYV all trading well on the week/month."
1. Info Tech was the most net-bought sector this week, driven mainly by short covers while long buys remain relatively weak.
2. Info Tech stocks are still heavily net sold MTD. This week's net-buying through to Thursday represents just ~40% of e previous 3 weeks.
3. Mag 7 stocks were net sold from Tuesday to Friday last week, highlighting risk-off sentiment.
4. Semis & Semi Equip (long buys), Software (short covers), and Tech ETFs (short covers) were the most net-bought Tech subsectors this week.
5. Goldman Sachs:
"While the directional engine of this market remains intact (token demand + GW/DC build-outs), the market has become much more discerning around the linearity of this story beyond CY27, pressuring multiples across the board until visibility improves, while investors are struggling to find names to rotate into outside of Semis/AI that are less susceptible to daily AI disruption volatility – cue names like IBM, AAPL, SPOT, V/MA, EBAY, LYV all trading well on the week/month."
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Bruh...I should've listened to my own advice 😭
Apparently the trade has been: Long Biotech, Short AI...
Apparently the trade has been: Long Biotech, Short AI...
@SKYBRIGHT_LIANG Biotech does look good esp. from a flows pov lately - I don't have much knowledge on the sector at all, so an ETF may be the way to go personally speaking.
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Note to self: trust your gut feeling, sometimes it's fine to take a trade even if you have little knowledge on a sector/company as long as risk mgmt is in-line.
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Absolutely insane...
HFs have pulled back gross exposure by ~8% -- the most aggressive de-grossing in at least ten years -- according to Morgan Stanley’s Prime Brokerage data.
In addition, TMT-focused HFs lost ~12% in October with losses concentrated in crowded Tech names -- chs Prime Brokerage.
HFs are cutting both longs and shorts to protect their solid YTD gains (and bonus packages) accrued in H1 2026.
That unwind reinforces selloffs in crowded stocks, which is why Amazon, Google and Intel saw violent sell-offs.
HFs have pulled back gross exposure by ~8% -- the most aggressive de-grossing in at least ten years -- according to Morgan Stanley’s Prime Brokerage data.
In addition, TMT-focused HFs lost ~12% in October with losses concentrated in crowded Tech names -- chs Prime Brokerage.
HFs are cutting both longs and shorts to protect their solid YTD gains (and bonus packages) accrued in H1 2026.
That unwind reinforces selloffs in crowded stocks, which is why Amazon, Google and Intel saw violent sell-offs.
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I spent the weekend writing an article on the current AI credit concerns.
I've set myself an ambitious (and maybe unrealistic) deadline to publish it on X later today.
Long-form writing & research is fun, but goodness me is it time consuming!
Hopefully the more I write, the sharper my pencil becomes.
I've set myself an ambitious (and maybe unrealistic) deadline to publish it on X later today.
Long-form writing & research is fun, but goodness me is it time consuming!
Hopefully the more I write, the sharper my pencil becomes.
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Black Friday for Technology stocks.
AI Market Memo:
Some tough earnings to digest this week, with the market puking at the sight of weak Q4 guides from Amazon and Intel.
The underlying context coming in was that Mag 7 positioning was crowded and that the bar for stellar sell-off was more likely than not.
But even I'm surprised by how aggressive today's sell-off was...I don't think anyone expected it to be *this* bad, which is ultimately why HFs rotated into the "less risky" hyperscalers for growth exposure in recent weeks, instead of the cyclicality overhang you get with Semis.
With such heavy positioning, the hyperscalers were not allowed to miss in anyway. So while AWS grew +39% Y/Y and Google Cloud grew +103% Y/Y, their topline guides were weaker than the Street thought they'd be.
All-in-all, that's a recipe for disaster.
[The glass-half-full view though is that fundamentals for AI remain strong: cloud demand is still firm and committed order books remain deep.]
However, the market simply does not care.
What the market actually cares about right now though is HOW the AI buildout is being paid for, what it does to balance sheets, and whether returns on capital will justify the spend and negative FCF for several quarters/years.
This is a post for another day, but with funding requirements intensifying, I think it's a totally fair criticism of the entire AI complex.
The market is quite clearly pricing-in a scenario where a funding strain forces the hyperscalers to rein in investment sooner than many expected...but nothing in these latest earnings releases points to that just yet with Cloud segment growth accelerating off of larger notional revenue bases.
I think this is a very good long-term outlook for the AI trade.
On positioning: In the short-term, I find it hard to lean in.
US midterms are next week and the Iran situation is still fluid...all while megacap tech stocks unwind from crowded positioning.
I think the market still has to absorb the sheer scale of committed capex, even with sizeable contracted revenue still to come. In that way, range-bound trading with thin positioning and sentiment skewed negative is my short-term base case.
My core view over recent weeks has been that once we pass midterms, the combination of thin positioning, negative sentiment, and improving AI fundamentals (ex. financing concerns), will be constructive and leaves headroom for the market to grind higher.
Time will tell.
AI Market Memo:
Some tough earnings to digest this week, with the market puking at the sight of weak Q4 guides from Amazon and Intel.
The underlying context coming in was that Mag 7 positioning was crowded and that the bar for stellar sell-off was more likely than not.
But even I'm surprised by how aggressive today's sell-off was...I don't think anyone expected it to be *this* bad, which is ultimately why HFs rotated into the "less risky" hyperscalers for growth exposure in recent weeks, instead of the cyclicality overhang you get with Semis.
With such heavy positioning, the hyperscalers were not allowed to miss in anyway. So while AWS grew +39% Y/Y and Google Cloud grew +103% Y/Y, their topline guides were weaker than the Street thought they'd be.
All-in-all, that's a recipe for disaster.
[The glass-half-full view though is that fundamentals for AI remain strong: cloud demand is still firm and committed order books remain deep.]
However, the market simply does not care.
What the market actually cares about right now though is HOW the AI buildout is being paid for, what it does to balance sheets, and whether returns on capital will justify the spend and negative FCF for several quarters/years.
This is a post for another day, but with funding requirements intensifying, I think it's a totally fair criticism of the entire AI complex.
The market is quite clearly pricing-in a scenario where a funding strain forces the hyperscalers to rein in investment sooner than many expected...but nothing in these latest earnings releases points to that just yet with Cloud segment growth accelerating off of larger notional revenue bases.
I think this is a very good long-term outlook for the AI trade.
On positioning: In the short-term, I find it hard to lean in.
US midterms are next week and the Iran situation is still fluid...all while megacap tech stocks unwind from crowded positioning.
I think the market still has to absorb the sheer scale of committed capex, even with sizeable contracted revenue still to come. In that way, range-bound trading with thin positioning and sentiment skewed negative is my short-term base case.
My core view over recent weeks has been that once we pass midterms, the combination of thin positioning, negative sentiment, and improving AI fundamentals (ex. financing concerns), will be constructive and leaves headroom for the market to grind higher.
Time will tell.
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Apple have reclaimed the crown of the world's most valuable company.
The market hates anything to do with AI.
The market hates anything to do with AI.
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Intel's earnings call was horrific.
The call sounded like we were listening to a nervous C-Suite meeting held at midnight rather than one where the aim was to ground (and even excite) investors in the face of adversity.
Tone matters a lot when the message is bad.
The call sounded like we were listening to a nervous C-Suite meeting held at midnight rather than one where the aim was to ground (and even excite) investors in the face of adversity.
Tone matters a lot when the message is bad.
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I wonder if there are any incentives for investors to rapidly add risk...
The next few weeks will materially impact bonus packages, so perhaps capital preservation is *the* incentive.
The next few weeks will materially impact bonus packages, so perhaps capital preservation is *the* incentive.
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