AI summary
Summary of article:
US stocks and AI concept stocks have experienced violent selling, but this article believes whether the crash will turn out to be true remains to be seen. The key point is to see whether the four warning signs appear over the next few days or weeks.
US technology stocks were filled with blood on the 5th, artificial intelligence (AI)concept stock Murder is the worst. Now everyone wants to ask: “US stocks Is a major accident going to happen? The answer is not yet known, but if four red lights come on in the next few days or weeks, we will be in big trouble. If not, no problem.
Based on the US Democratic Party’s stance of strictly controlling AI and data center construction projects, the day after the “blue tsunami” triggered by the US midterm elections on the 3rd, the three major US stock indexes rose sharply instead of falling.Dow Jones The index rose to 1,500 points, which surprised many. It was later revealed that selling pressure caused the delay by only one day.
US AI stocks were roaring with activity on the 5th, continuing the Asian market’s underperformance that day. The selling pressure on AI stocks was so intense that it dragged down other stocks, causing major US stock indexes to fall across the board. The Dow Jones index closed down 1,833 points (a decline of 3.4%), the S&P 500 index fell 4.3%, the Nasdaq Composite Index, which is dominated by technology stocks, fell 5.5%, and the Philadelphia Semiconductor Index also fell 12.3%.
Is disaster imminent for the US stock market? Financial Times columnist Armstrong said this question is difficult to answer. Investors who use leverage to play stocks may, under the pressure of margin calls, begin selling their holdings indiscriminately, triggering a dangerous decline. In that case, index fund investors will also rush to sell AI stocks to reduce the risk, causing the entire market to fall.
However, enthusiasm for AI concept stocks actually reached its highest point a long time ago and has been under pressure over the past few months. The market for major US semiconductor stocks has peaked in early October; Micron Technology and other memory chip stocks, which have risen even more rapidly, have already peaked in June; Industrial stocks related to the data center construction boom have declined since May. In other words, the decline in AI stocks has already begun, but the US midterm election results have accelerated the decline.
Moreover, the economic fundamentals on which the US bull market rests are still strong, as shown by the number of unemployment benefit claims and the ISM Manufacturing and Services Index released this week. And corporate earnings growth remains solid, even for companies outside the technology and energy sectors. The performance of non-tech stocks has also improved in recent months.
All of these are not sufficient arguments to refute “market collapse”, but they should downplay the likelihood of collapse.
Investors may also take solace from other signs: Although safe-haven assets performed strongly on the 5th, investors were not fully committed. U.S. 5-year and 10-year Treasury bond prices rose, with each yield falling by 8 basis points, but that trend lasted a month.
Credit default swap (CDS) price trends also vary widely, depending on the issuing company’s risk of default on its debt, showing that investors are not blind to the good and the bad. The CDS spread of “new cloud” company CoreWeave increased by 127 basis points on Thursday, and the price of SpaceX’s 5-year CDS also increased by more than 20 basis points; However, CDS contract prices of Microsoft, Amazon and Google remained almost unchanged.
Again, investors have reason to be nervous. From a certain point of view, the decline of AI-related stocks is not the most worrying thing. What is even more worrying is that the selling pressure is spreading to other sectors as well.
For example, consumer staples stocks and healthcare stocks, which have performed well recently, also fell to 5th place, although the decline was more moderate than that of technology stocks. Walmart, P&G, Coca-Cola, Eli Lilly, Apple and other benchmark stocks closed lower on the 5th. From this perspective, selling pressure is showing early signs of changing from “selling AI stocks” to “selling everything.”
To know if the stock market is truly in a decline, investors should pay attention to the following four warning signs:
1. Do investors other than technology stocks also show signs of “giving up and surrendering their stocks”? If so, it indicates that selling pressure is increasing on the stock;
