Billionaire Paul Singer Says Wall Street Faces “Obliteration”

For most of 2026, the risk of sitting out the stock market felt greater than the risk of buying in. The S&P 500 gained nearly 13% through September, and investors who were wary of the artificial intelligence boom had to watch from the sidelines as the market climbed. Then October gave them a glimpse of what could happen when investors started asking how soon all that spending would pay off. The Nasdaq Composite fell 5.3%, while the S&P 500 slipped 0.9%. 

For billionaire hedge fund manager Paul Singer, the sell-off offered an early test of a warning his firm had just sent to investors.

Paul Singer’s Warning Goes Beyond AI Stocks

Singer’s Elliott Investment Management, which reported managing $80.3 billion as of June 30, has a name for what can happen when the fear of missing out wears off. In an October investor letter review by The Wall Street Journal, Elliott called it FOGO, or “fear of getting obliterated.” The firm drew a parallel to the speculative years before the Great Depression, pointing to persistent inflation, federal deficits, and debt-financed bets on AI infrastructure.

Elliott’s argument is that a reversal in just one or two of the forces driving the rally could set off a wider sell-off. If investors lose confidence in the returns on new data centers, lenders may demand more to finance them. That can make it harder for developers to keep spending and leave their suppliers facing slower growth than shareholders had counted on. There were signs of strain before October ended. Jeffrey Gundlach had already flagged widening spreads on riskier AI debt.

October May Have Given Singer an Early Win

Through September, investors had good reason to wonder what Elliott’s caution was buying them. The firm’s 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. Elliott says it uses hedges to protect against adverse market conditions. Its investor letter laid out the other half of that strategy. If prices fall far enough, the firm wants cash available to buy from investors who have to sell.

October may have changed the score. The Nasdaq-100 fell 6.6%, and Reuters reported that concern about AI spending outpacing near-term cash generation helped drive the month-end sell-off. Elliott may have outperformed if its hedges cushioned the decline, though the reported results stop in September. October did give Singer some early vindication on the risk itself as investors began looking harder at how much cash AI spending leaves behind.

The rest of the market tells a different story. Nasdaq’s October review showed that nine of the S&P 500’s 11 sectors rose, and the equal-weight version of the index gained 5%. That’s a sharp contrast to the headline index’s 0.9% loss. Investors could recognize the risk of an AI bubble and still find places to put money to work. October’s winners show how much room there was to move within the stock market itself.

Key Takeaway

Paul Singer’s warning is that it may take only one or two things going wrong to unwind a rally built on cheap financing and big expectations. October offered an early look at how that could start. As investors questioned when AI spending would pay off, the Nasdaq-100 fell 6.6%, and nine of the S&P 500’s 11 sectors rose. The sell-off exposed a vulnerability in the AI trade, while the broader market held up.

Singer may yet be right about a deeper downturn. In the meantime, take a cue from what Elliott is trying to do. Keep enough cash on hand that a sell-off gives you the option to buy at lower prices. You can still face hidden concentration risk if the same handful of AI stocks show up across several of your funds. Check how much you own in total and trim back if the combined position is bigger than you intended.

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