RESOLVING THE LEDGER
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See the full story · 1 sourcesCNBC's Jim Cramer said Tuesday the biggest obstacle to technology stocks has finally been removed.
"Ever since we found out that Leopold Aschenbrenner's hedge fund, Situational Awareness, blew up last week, we've seen tech stocks flying all over the place, unleashed, unbound and roaring higher, catapulted by the lack of sellers of any size," the " Mad Money " host said.
Situational Awareness, the AI-focused hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, was forced to unwind its highly leveraged portfolio last week after suffering steep losses. Cramer said the liquidation — along with selling from investors who had copied the fund's trades — flooded the market with shares of AI infrastructure companies, pushing many fundamentally strong stocks well below where they should have been trading.
With much of that selling now behind the market, Cramer said earnings have once again become the primary driver of stock prices.
"In the collapse of Situational Awareness, we realize what we had is a clearing event — it wiped out all your fellow shareholders with weak hands," he said. "Once it ended, there were no more forced sellers."
Enterprise software has been one of the clearest examples, Cramer said. For much of the year, investors broadly favored AI infrastructure stocks while betting against software companies they feared would lose pricing power . However, when ServiceNow reported a strong quarter in late July, the stock rallied instead of selling off as it had done in prior quarters. Cramer said that "caused an avalanche," helping ignite a broader rebound across the sector.
"So much of tech, freed of the forced sales, goes ever higher," he said. "We all owe Leopold Aschenbrenner a gigantic ocean of thanks. This is his rally. Too bad he didn't get to enjoy it."
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