Key Takeaways
- • Elliott Investment Management, managing $80.3 billion as of June 30, warned in an October investor letter (as reviewed by The Wall Street Journal) of "FOGO," or "fear of getting obliterated," a potential reversal of the AI-driven rally.
- • The Nasdaq Composite fell 5.3% and the Nasdaq-100 fell 6.6% in October, while the S&P 500 slipped 0.9%, according to the article's cited figures, as concerns over AI spending returns weighed on the market.
- • Elliott's reported returns were flat in Q3 and below 2% for the first nine months of 2026, roughly 11 percentage points behind the S&P 500, though its October performance was not reported.
- • Nine of the S&P 500's 11 sectors rose in October and the equal-weight index gained 5%, indicating the sell-off was concentrated in AI-linked names.
- • Elliott cited persistent inflation, federal deficits, and debt-financed AI infrastructure bets as parallels to the speculative period before the Great Depression.
Summary
Hedge fund manager Paul Singer's Elliott Investment Management has warned that investor fear of missing out could flip into a sharp reversal, which it calls "fear of getting obliterated" (FOGO). According to an October investor letter reviewed by The Wall Street Journal, Elliott drew a parallel to the speculative years before the Great Depression, citing persistent inflation, federal deficits, and debt-financed bets on AI infrastructure. The firm argues that a reversal in one or two of the forces driving the rally could trigger a broader sell-off. If investors lose confidence in returns on new data centers, lenders may demand higher returns to finance them, making it harder for developers to keep spending and slowing growth for their suppliers.
The warning came as markets showed early strain. The S&P 500 gained nearly 13% through September, but October brought a sell-off: the Nasdaq Composite fell 5.3%, the Nasdaq-100 fell 6.6% per Reuters' reporting on concerns that AI spending was outpacing near-term cash generation, and the S&P 500 slipped 0.9%. Jeffrey Gundlach had already flagged widening spreads on riskier AI debt before October ended.
Elliott's performance through September was weak. Its reported returns were flat in the third quarter and below 2% for the first nine months, roughly 11 percentage points behind the S&P 500. The firm says it uses hedges to protect against adverse conditions and wants cash available to buy from forced sellers if prices fall far enough. Its October results were not reported in the source material, so it is unclear whether those hedges cushioned the decline.
Broader market data showed the sell-off was narrow. Nasdaq's October review found nine of the S&P 500's 11 sectors rose, and the equal-weight index gained 5%, a sharp contrast to the headline index's 0.9% loss.
The warning came as markets showed early strain. The S&P 500 gained nearly 13% through September, but October brought a sell-off: the Nasdaq Composite fell 5.3%, the Nasdaq-100 fell 6.6% per Reuters' reporting on concerns that AI spending was outpacing near-term cash generation, and the S&P 500 slipped 0.9%. Jeffrey Gundlach had already flagged widening spreads on riskier AI debt before October ended.
Elliott's performance through September was weak. Its reported returns were flat in the third quarter and below 2% for the first nine months, roughly 11 percentage points behind the S&P 500. The firm says it uses hedges to protect against adverse conditions and wants cash available to buy from forced sellers if prices fall far enough. Its October results were not reported in the source material, so it is unclear whether those hedges cushioned the decline.
Broader market data showed the sell-off was narrow. Nasdaq's October review found nine of the S&P 500's 11 sectors rose, and the equal-weight index gained 5%, a sharp contrast to the headline index's 0.9% loss.
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