A broad AI-themed selloff has rattled global tech, capped by the blow-up of a leveraged AI hedge fund and a violent deleveraging in Korean storage stocks, reviving the question of whether the AI bubble is finally bursting.
Leverage met a crowded trade
Leopold Aschenbrenner’s Situational Awareness fund, peaking near 45 billion dollars in assets and running about 4x leverage, was forced to sell roughly 16 billion dollars of public equities to Citadel on 30 July, with assets collapsing to about 10 billion in a self-reinforcing spiral that dragged down its own holdings. In Korea, the KOSPI fell nearly 40 per cent from its June peak and SK Hynix almost 60 per cent, with leverage-ETF losses so severe that about one in thirty adults faced a margin call. JPMorgan now estimates the deleveraging is roughly 90 per cent complete.
The fundamentals tell a different story
Underneath the volatility, the real-economy returns are beginning to show. Microsoft’s Azure grew 43 per cent with a remaining performance obligation of 678 billion dollars, up 84 per cent, while capex came in below estimates and cash flow rose 30 per cent. Amazon’s AWS backlog reached 496 billion dollars, up 154 per cent. AI token prices are rising rather than falling, and Gartner projects the memory market compounding at 86 per cent to about 748 billion dollars by 2027, with SK Hynix leading high-bandwidth memory.
A rotation, not a collapse
Morgan Stanley frames this as a mid-cycle quality rotation in which AI adopters outperform semiconductors and hyperscalers, with agentic AI the next source of alpha, adding about 100 basis points of S&P 500 net margin by 2027. Valuations have retraced toward 2024 lows, with some forward earnings multiples in single digits. The leveraged excess is flushing out, but the investment case built on genuine adoption is only starting to prove itself.
Read the original report (Sohu IT)
Translated and adapted from Sohu IT (it.sohu.com).