Editorial: Red Alert… But

Bruno Bertez, 18 October 2026

The warning signs of a puncture in the “everything-is-a-bubble” regime are multiplying.

They deserve to be taken seriously.

Stress indicators are flashing across the most richly valued segments of the market—those that have absorbed a disproportionate share of flows and expectations in recent years.

The sums involved are substantial.

Recent price action shows a sharp compression in valuations tied to artificial intelligence and semiconductors, the sectors that have largely driven global performance.

The U.S. semiconductor index (SOX) fell 11.4% on the week, its steepest weekly decline since the end of the strong digital-expansion phase.

Equipment makers were hit hard: Applied Materials −19.3%, Lam Research −17.2%, KLA −15.3%. Other names followed: Coherent −25.5%, Lattice Semiconductor −17.8%, Marvell −17.2%. Nvidia gave up 6.1% (roughly 12% over eight sessions), Broadcom 9.1%, Micron 14.6%, Intel 14.2%, and AMD 13.1%.

Asian markets exposed to the technology supply chain corrected in parallel.

South Korea’s KOSPI lost 14.5% on the week (18.3% over seven sessions) and now sits nearly 40% below its 19 June peak. Samsung declined 17.7% and SK Hynix 24.3% over the period; since June the respective drawdowns reach 43% and 57%.

Shanghai’s composite touched a one-year low (−2.6% on the week), while the growth-sensitive ChiNext fell 8.9% and stands 37% below its June highs.

The Nikkei dropped 5.4%, SoftBank 18.2% (45% since June). Taiwan’s TAIEX declined 4.5%, with the semiconductor sector down 5.1% (6% beneath its 6 October record).

At the same time, the yield on the U.S. 10-year Treasury rose 12 basis points to 5.33% after a disappointing CPI print.

Should that level hold into the close, it would mark the highest since 2007.

Individual high-flyers suffered heavy damage. CoreWeave fell 12% in a difficult Friday session. Nebius, another “neocloud” name, dropped 12.2%. Palo Alto Networks declined 7.6% and Palantir 7.2%. After setting a record on Tuesday, the MAG7 index retreated 5% and closed the week down 1.9%. Friday’s losers included Meta (−3.7%), Alphabet (−2.5%), Tesla (−2.1%), Microsoft (−1.9%), and Amazon (−1.9%).

The market dynamic recalls the speculative spasms that struck the large telecom stocks in 2000. The figures are impressive; they amount to a powerful deflation of the global financial-asset bubble.

16 October – Reuters: “Global hedge funds suffered heavy losses this week, hard hit by a massive unwind of AI positions. Asia-focused funds were the most affected… Global fundamental long-short or stock-selection funds lost money every day this week, according to Goldman Sachs’ prime brokerage… with losses of 2.9% for the week ending 15 October. Year-to-date they remain up 14.3%…

On Thursday, hedge funds across strategies declined sharply… ‘What we observed was not so much a fundamental rejection of AI as a classic, rapid unwind of an overcrowded position confronting macro reality,’ said Bruno Schneller, managing partner at Erlen Capital Management… ‘What is interesting about this selling is that it reveals how much of the hedge-fund industry has, in reality, been betting on the same underlying theme, even when the portfolios look very different on paper,’ Schneller added.”Yet what concerns me more than the correction in the flashy equities is the revulsion in credit.

The debt crisis intensified on Friday. The widening of CDS spreads evokes very bad memories. CoreWeave CDS jumped another 42 basis points to a record 1,128, an alarming rise of 226 basis points on the week.

High-yield CDS climbed 10 basis points Friday to close at 357, the highest since 7 April.

Technology spreads within the Bloomberg U.S. Corporate High Yield index widened 19 basis points on Friday.

Investment-grade CDS rose two points to 62.2, the highest since 31 March. Nvidia CDS advanced another two points (10 basis points on the week) to a record 96.

SoftBank CDS reached a record 428 on Thursday (closing the week up 22 basis points at 421). I have long regarded SoftBank as a candidate for systemic stress. SoftBank’s 2034 bonds saw their yield jump 33 basis points on Friday to a record 9.95%, a rise of 49 basis points on the week.

3 October – Reuters: “SoftBank’s promise of record yields on an $11 billion high-risk bond issue illustrates the pressure on CEO Masayoshi Son to monetize his risky AI bet amid fears of market overheating. The issue, completed last month, fits into the sharp rise in corporate borrowing seen this year, including large issues by Amazon.com, Alphabet, and Tencent. The scale of Son’s investments, which include full support of $64.6 billion for OpenAI, the creator of ChatGPT, has made this technology and finance conglomerate a key indicator of the AI market.

These new investments are now under closer scrutiny from analysts and investors concerned about the concentration of SoftBank’s portfolio and the speed with which AI company investments will pay off.”The market dynamic is destructive for leveraged speculators: the combination of rising yields, widening spreads, and soaring CDS prices (market insurance) is effectively putting them “on the street,” as the saying goes.

This dynamic signals a new round of deleveraging, reduced liquidity, worsening debt problems, and possibly margin calls.

The price of leveraged loans (LSTA index) fell 24 cents this week to 94.73, its lowest since 13 April. A sign of the rapid deterioration in the environment for leveraged finance, the index has lost nearly a full point in a month and is now within 14 cents of its July 2023 low.Yet our analytical framework is not built on these symptoms.

The true crisis will arrive when the global speculative financial community realizes that the authorities have lost control—that their arsenal is empty.

All the major gurus have long known that everything is rotten; they also know that the authorities wish to prolong this phase by any means. The question is whether they still have the means.

Doubt is emerging, but conviction is not yet there.We are not there yet.

The greatest bubble in human history is finally beginning to leak air. To wobble.A particularly worrying period is opening.

Contrary to the prevailing view, we are not facing a polycrisis—a conjunction and collision of multiple independent crises that have synchronized and resonated. No. We face a single crisis that manifests in various forms. The apparently diverse crises all share the same underlying: excess paper, excess promises, excess fictitious wealth.The underlying is the gap—the chasm—between everything that is promised, imagined, dreamed, and everything that is and will be available to honor those promises.

The crisis unfolding is systemic.

It is the end-of-cycle crisis of long-term credit, the end of the ideology that treats the inflation of signs as the solution to every problem, with the United States at the center of the contradictions, the antagonisms, the imbalances, and the administration of the false remedies.

AI arms race constitutes the apparent epicenter of an unprecedented global bubble. It is important to note that the rise in Treasury yields and price inflation were not among the primary causes of the revulsion; the causes were endogenous. No external shock.

These movements reveal the system’s growing fragility and its real lack of resilience at the points of greatest excess: semiconductors, artificial intelligence, Asian markets linked to the technology production chain. The synchronization of the declines and the speed of the corrections signal that the weaknesses are fundamental and that the margins for maneuver are shrinking.

Yet these signs remain symptoms. They do not yet mean that the market has internalized the idea that monetary and fiscal authorities have exhausted their capacity for effective intervention.

As long as the dominant actors still believe that support measures—rate cuts, liquidity injections, verbal or regulatory interventions—can be deployed with a credible stabilizing effect, the system can absorb corrections, even severe ones.

The qualitative shift—the one that transforms a correction into a systemic crisis—will occur when that belief collapses.

When the market observes that the authorities no longer possess sufficient leverage, or that its use will produce side effects judged worse than the disease: loss of control over the currency, accelerating inflation, a crisis of confidence in the debt.We do not yet observe that moment. The authorities still have means, and the market continues, for the most part, to give them the benefit of the doubt.It is crucial to distinguish early warnings from signals of rupture. The former call for vigilance, a progressive reduction of risk, and careful examination of the most exposed positions.

The latter, when they appear, will require a reaction of an entirely different nature.Between the two, time continues to pass—but it is shortening.We have never been so close to the end.