The October selloff in U.S. technology shares has sharpened a risk facing crypto markets: if losses in AI-linked equities trigger another round of forced deleveraging, highly liquid digital assets could again be sold alongside stocks, metals and other readily tradable holdings.
The Nasdaq Composite fell 5.3% during October 2025, its weakest monthly result since March of that year, while the S&P 500 posted a second consecutive monthly decline. Dohmen Capital Research said more than $1.5 trillion in U.S. equity market value was erased during the month as pressure spread beyond artificial intelligence and semiconductor leaders into the broader market.
Bert Dohmen and Dion Dohmen of Dohmen Capital Research described the decline as a deleveraging event rather than a narrow reassessment of a few expensive technology names. In that environment, traders facing margin calls sell assets that can be converted into cash rapidly. Gold and silver were also caught in the move, according to the firm, underscoring how liquidity needs can override the usual differences between asset classes.
For crypto, the pattern leaves little room for the idea that Bitcoin or major tokens will automatically provide shelter during a sharp equity-led liquidation. Digital assets have repeatedly traded as high-beta risk instruments during periods of stress, especially when falling markets force leveraged participants to close positions.
Ai spending comes under closer scrutiny
The catalyst for the October weakness was growing concern over the economic return on AI infrastructure spending. Major technology companies have committed large sums to data centers, chips, power capacity and cloud infrastructure needed to train and run AI models. Markets have rewarded that spending for much of the previous rally, largely on the expectation that rising demand for AI products would translate into durable revenue growth.
Dohmen Capital Research said that confidence began to fray as traders focused more closely on who would finance the spending and whether eventual revenue could justify the scale of capital expenditure.
The firm argued that technology and semiconductor shares had effectively peaked in June, well before October's broader downturn made the reversal more visible. That assessment matters for market positioning because late-stage rallies can continue long enough to encourage dip-buying even after underlying leadership has weakened.
Late-month corporate earnings added to the pressure. Meta Platforms' third-quarter update, released after the market close on Oct. 21, was followed by results from Microsoft and Google on Oct. 28, according to the source material. Alphabet shares fell 13.5% in a single session, contributing to a broader retreat among the largest technology companies.
The Roundhill Magnificent Seven ETF, traded under the ticker MAGS and designed to track the largest U.S. technology names, lost momentum after reaching a high on Oct. 13. It then closed below 70 for two consecutive sessions toward month-end, a technical move Dohmen Capital Research characterized as a failed breakout.
Elliott flags funding and leverage risks
Elliott Investment Management, the firm founded by Paul Singer, framed the issue less as a debate over AI's technical potential than as a question of market structure and financing. In an October letter, Elliott identified circular funding arrangements between AI model developers and infrastructure suppliers, debt-funded capital expenditure, and rising anti-AI social movements as sources of risk.
Circular funding can make demand appear stronger than it is when companies within the same ecosystem finance, buy from, or commit capacity to one another. Such arrangements are not necessarily improper, but they can become more fragile if the anticipated end-market demand does not arrive quickly enough.
Elliott also warned that pressure on AI product prices or reduced expectations for AI buildouts could produce a severe market reaction. The firm compared aspects of the environment to the speculation that preceded the Great Depression-era Roaring Twenties, while cautioning that enthusiasm could turn rapidly once prices begin to fall.
Jesse Cohn, managing partner at Elliott Investment Management, wrote on X that the market feels different, citing a pattern in which winning shares continued to rise while losing names were punished heavily. He also pointed to increasingly unpredictable and outsized reactions to corporate earnings.
Elliott said it had shifted toward capital preservation. Dohmen Capital Research similarly advised against treating weakness in AI-related shares as an automatic buying opportunity, arguing that major market peaks often form quietly and only become obvious after leadership has already broken down.
Crypto faces the same liquidity test
The immediate transmission channel to crypto is leverage. A fund, trading desk or individual trader facing losses elsewhere may not sell the asset they consider weakest; they may sell the asset they can liquidate fastest. Deeply traded digital assets can meet that requirement, particularly during U.S. market hours when cross-market risk sentiment is moving quickly.
Bitcoin briefly traded near $78,037 on Nov. 2, according to the supplied material, following the period of market stress. The move reinforced the difficulty of treating Bitcoin as a reliable hedge against an equity liquidation driven by financing pressure. Its longer-term investment case and its behavior during a margin-driven selloff are separate questions.
The same distinction applies to stablecoins. Fully backed, redeemable digital dollar products can reduce exposure to intraday token volatility for traders who choose to move out of leveraged positions, but their usefulness depends on the issuer, reserve structure, redemption access and the specific risks of the platform or wallet used to hold them.
The more practical indicators in a stressed crypto market are usually leverage-related: perpetual futures funding rates, open interest, liquidation volumes and the gap between spot and derivatives prices. Rapidly rising funding costs can indicate that bullish positioning has become crowded, while a sharp fall in open interest may show that leveraged trades are being closed rather than simply marked lower.
Self-custody can also reduce dependence on an intermediary for holders who do not need to trade actively, though it introduces operational responsibility around private-key security and transaction management. It does not protect a holder from a falling market price.
A technology-led equity correction will not mechanically dictate crypto's next move. Yet the concerns raised by Dohmen Capital Research and Elliott describe conditions in which liquidity, leverage and funding needs can dominate asset-specific narratives. Until pressure in AI-linked equities and credit-backed spending eases, aggressive long positioning in digital assets remains exposed to the same forced-selling dynamics that pushed October's stock decline beyond the technology sector.
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