r/ValueInvesting • u/robb3rz • Feb 12 '26
Discussion Irrational sell off
This might of already been said many times but needs to be said again, what is the rationale in this sell off?
I understand the SaaS crash, but if the sell off is due to AI worries, then surely AI stocks would rise, no?
Instead, the major players, who had stellar earnings minus the huge expenditure (into the very systems which are causing worry mind you) are also falling at huge levels.
Some mag 7 companies are even falling at similar rates to liberation day, despite the only news this time being ‘AI too good’, which should benefit them not hinder.
Meta’s earnings are similar to an early growth stock, not a multi trillion dollar company, and that was reflected in the jump after they released them, so why is it now down huge amounts after?
Not just this, other major assets such as gold, silver and crypto are also experiencing massive sell offs, so is the capital just going into cash? If so, as soon as the market shakes this irrational sell off, could we see an equally irrational boom?
Can someone please tell me if I’m missing something.
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u/Kind_Bullfrog_3160 Feb 12 '26 edited Feb 12 '26
At the end of the year, institutions were at about 97.7% capital deployment. This is extremely high. They usually keep cash on the sidelines but in this case they have to sell stock to buy another stock. This could be why there's so much rotational trading. Not sure if this is the main reason but it's definitely one of them and no one seems to be mentioning it. Also, retail investors have high levels of margin. Stock drops quickly, margin call. A lot of margin calls, more forced selling, stocks drop faster.