The U.S. stock market crash may not be over, as hedge funds face further stampede risk.

U.S. stock market rout may not be over; hedge funds face further stampede risk
On Thursday, the three major U.S. stock indexes plunged across the board, leaving no company immune, from chipmakers such as Nvidia to defensive stocks such as Walmart.
Because political developments could dampen growth in the artificial intelligence sector, companies at the heart of the AI boom were hit hardest.
The Nasdaq 100 Index fell more than 6%, marking its largest decline since the peak of the COVID-19 pandemic in March 2020; Nvidia shares plunged more than 9%, their biggest drop since January 2025.
On Thursday, the reason for the sharp declines in their shares was that Democrats won a landslide victory in congressional elections, which could signal a shift in the political landscape and dampen the sector’s rapid growth and the hundreds of billions of dollars invested in the computer equipment that underpins it.
Nvidia Corp., the world’s most valuable company, saw its shares plunge more than 9%, marking its largest single-day decline since January 2025 and wiping out all of its gains for the year. All 30 Dow Jones Industrial Average components fell, the S&P 500 dropped 4.4%, and the closely watched semiconductor index plunged 12%, its largest single-day decline since the outbreak of the pandemic. As markets speculated that hedge funds were selling their holdings, an ETF that had heavily bought so-called momentum trades suffered one of its worst single-day performances in more than a decade, and investors flocked to U.S. Treasuries for safety.
Hedge funds were also caught up in the rout.
ExodusPoint Capital Management, a giant in the hedge fund industry, fell 2.4% last month, shrinking its year-to-date gain to 1.6%. Balyasny Asset Management fell 3.4% in October and is expected to lose 2.7% in 2026.
Millennium Management, run by Izzy Englander, fell 2.3% last month, narrowing its year-to-date gain to 5.7%. The firm, which manages $95 billion in assets, is withdrawing more than $1.5 billion in leveraged cash from two external hedge funds—Troluce Capital Advisors and Axebrook Capital—in response to losses at both firms.
Samlyn Capital, run by Rob Polli, fired senior analysts after selling investments in nearly every sector except the global financial services industry, and is now focusing on that sector.
According to people familiar with the matter, the $7 billion equity hedge fund sold stocks in several sectors, including industrials, technology and retail, several weeks ago, while the recent market selloff has inflicted heavy losses across the hedge fund industry.
One of the people familiar with the matter said the fund had fallen about 5% year to date as of October.
“The real danger is not the market selloff itself, but the illusion of diversification among hedge funds,” said Bruno Schnerle, managing partner at multi-family office Erlen Capital Management. “I think the bigger risk is yet to come: as losses mount, risk managers may force funds to cut positions, which could trigger another round of selling regardless of fundamentals.”