On Thursday, Asian tech stocks suffered a sharp sell-off, bringing a chill to global stock markets. Investors flocked to the bond market in search of safe havens. As interest rates remain high and are likely to rise further, investments related to data centers and other artificial intelligence (AI) that were previously heavily favored by the market are now facing the test of revaluation.

S&P 500 index futures fell by 0.3%, and Nasdaq 100 index futures fell by 1.2%. Anthropic PBC disclosed to potential investors that revenue in the third quarter reached $16.8 billion. Although the growth remains strong, the relevant data suggests that the growth rate has slowed down, further exacerbating the downward pressure on tech stocks.

An exchange-traded fund (ETF) that tracks chip manufacturers (ETF) indicates that the selling pressure in the chip sector, which has persisted for six consecutive trading days, may continue. After the stock price of CoreWeave plummeted by 15% on Wednesday, it fell another 6% before the opening on Thursday. The company's bonds also dropped to levels that are typically considered indicative of distressed debt.

Yesterday, the S&P 500 index fell by more than 1%, and the Nasdaq index declined by nearly 2%. An analyst at JPMorgan Chase wrote in a report: "Although the initial selling was triggered by CPI data that was higher than expected, tech stocks were the main driving factor behind the market decline on that day."

Analysts stated: " AI has once again become a major challenge facing the market, and financing risks, as well as the timing of the initial public offering ( IPO ), remain at the core of market concerns."

AI The hardest-hit area of the sell-off tide

Asian stock markets became the hardest-hit areas during the selling spree on Thursday. South Korea's Composite Stock Price Index tumbled 7.6%, and the shares of chip giants Samsung Electronics and SK Hynix both fell by more than 9%. Due to having many leading chip manufacturers, the South Korean stock market has previously been one of the main beneficiaries of the AI investment boom. Meanwhile, Japan's Nikkei 225 index fell 5%, and the Tokyo stock market also recorded its sixth consecutive day of decline. TSMC's shares fell 2% before it announced its financial results. The subsequently released financial reports showed that TSMC's profits exceeded analysts' expectations, but the profit margin did not meet market expectations.

Shengbao Bank's Chief Investment Strategist in Singapore, Charu Chanana, stated: "The selling pressure in the Asian markets is less of a reflection of a sudden deterioration in the fundamentals of the tech industry, and more of a market re-evaluating capital costs."

She stated, "Investors are not questioning whether the demand for AI truly exists, but they are increasingly concerned about what price should be paid for such growth in an environment where interest rates are high, volatile, and may continue to rise."

After entering the European trading session, the market stabilized somewhat. The proportion of the European technology sector was relatively small, and at the same time, the yield on government bonds fell, as did the prices of oil and natural gas, which also alleviated some of the recent market pressures. European stock markets declined by 0.3%, with technology stocks leading the decline. In contrast, Ericsson's stock price recorded the largest increase since January, due to the company's third-quarter performance exceeding analysts' expectations.

AI Report Raises Doubts

After experiencing a sharp rise earlier on, global stock markets are now facing increasing pressure. Investors have begun to question whether the tens of billions of dollars invested in the AI sector can generate sufficient returns, and as a result, they are turning to safer assets. At the same time, persistent inflation in the United States also increases the likelihood of major central banks adopting more aggressive tightening policies, which could further drive up financing costs.

Analyst Adam Crisafulli pointed out: "In the AI sector, investors have become accustomed to parabolic high-speed growth, so a slowdown in growth will hit market sentiment." He added, "Furthermore, investors' attitude towards this industry is becoming less favorable, which will inevitably have an impact on capital expenditure."

At the same time, the cost of insuring against debt default risks for technology giants related to AI is also rising, with some reaching record highs. The credit default swaps (CDS) spreads for cloud computing giant Oracle, AI investment firm SoftBank Group, and data center operator CoreWeave have all widened.

However, some strategists still see optimistic factors. They point out that market trading volume is relatively low, and October is usually a month with greater volatility in financial markets.

Mark Matthews, the head of Asian research at UBS Bank Switzerland in Singapore, said: "I am not worried, as stock valuations are not expensive, and there are no signs of an economic recession. Moreover, in most sectors of the AI industry, demand still far exceeds supply."

Market Focus on the Fed's Interest Rate Prospects

Chip stocks have been declining for several consecutive days, making bond yields, which are near decades-highs, increasingly attractive to investors. U.S. Treasury bonds continued to rise across the board, with the yield on 10-year Treasuries falling by 10 basis points to 5.09%, marking the lowest level in three weeks.

Bloomberg cross-asset strategist Ven Ram stated: "The reaction in the bond market is a typical tactical rebound, and today's price movements do not represent the future direction of development. The stock market is being sold off, which is also a natural response under the current circumstances. However, with inflation still so high, now is not the time to make large purchases of nominal bonds."

DBS Bank analysts wrote in the report: "We still believe that the current yield levels offer good investment value. We do not think that the Federal Reserve would have to raise interest rates twice in a row just because of a single CPI report."

The inflation data released on Wednesday once again changed the market's expectations regarding the Federal Reserve's interest rate path. Traders initially believed that the chances of the Fed raising interest rates this month were roughly equal to those of not doing so, but they later reduced their bets on a rate hike.

According to the FedWatch tool of the CME Group ( CME Group ), federal funds rate futures currently reflect that the implied probability of the Federal Reserve maintaining the interest rate unchanged at its two-day policy meeting that concluded on October 28 is about 75%, which has not changed significantly from the level at the beginning of this week.

The US dollar declines, while gold rebounds.

In other markets, the US dollar fell by 0.3%, dropping from its 18-month high. The Swiss franc performed relatively strongly. The US dollar weakened against the Japanese yen by 0.4% to 157.725; the euro rose against the US dollar by 0.6% to 1.12 USD; and the British pound strengthened against the US dollar by 0.5% to 1.32 USD.

The Australian dollar fell by 0.3% to 0.6954 US dollars. Data previously released showed that the number of employed people in Australia decreased unexpectedly by 39,300 in September, while the market had expected an increase of 20,000.

Investors are currently turning their attention to the U.S. Producer Price Index ( PPI ) and retail sales data, which will be released on Thursday.

As concerns about supply disruptions in the Middle East eased, Brent crude oil fell by more than 2%, dropping below $104 per barrel. Meanwhile, gold rebounded after three consecutive days of decline, trading at around $4,150.

The Fed remains inactive in October, adding another vote: Daly says there is enough time to make the right decision

San Francisco Federal Reserve Chair Mary Daly stated that the Fed may need to further raise short-term interest rates to curb high inflation, but she hinted that there is no need to do so at the Fed's October meeting. In an interview, Daly said, "It is more likely that we will need further adjustments, but for me, the timing of these adjustments is still a matter we are deliberating over," "I don't feel there is an urgent need to make decisions with limited information. I think we have the time we need."

Regarding the U.S. CPI data for September released on Wednesday, she stated that although the initial reaction was "strong" – interest rate futures traders quickly bet on a Fed interest rate hike in October – investors "calmed down" after analyzing the data. Rising gasoline prices drove the overall increase, and while underlying inflation remained sticky, it did not surge sharply.

BTIG: "Interest rates and the NASDAQ index both fall" may become the most painful trade

US investment bank BTIG stated that after inflation data exceeded expectations, the bond market exhibited a typical 'message failure' ( news failure ), confirming that US Treasury yields ( SHY , TLT , IEF ) have reached tactical tops. This change has laid a highly counter-intuitive trap for the stock market – 'interest rates are falling, yet NASDAQ is actually declining.'

Klinsky warns that the truly painful trend in trading is quite the opposite: interest rates and tech stocks are both falling simultaneously. For investors, this means that the previous one-sided strategy of "betting on interest rate cuts and buying tech stocks" may be being replaced by a new combination: a decline in yields no longer equates to a resurgence in risk appetite, but rather appears to be a re-pricing of growth and profit expectations.

"Big Bear Short" Berry Issues Another Warning About U.S. Stocks: Wall Street May Face a "Bloody October"

Burry outlined a bearish scenario for "October Blood": if the "Big Seven" of U.S. stocks follow the decline in semiconductor stocks, and bond yields also fall in tandem, then his conviction regarding this scenario will be even stronger. The decline in U.S. Treasury yields on Wednesday did not benefit tech stocks. Burry pointed out that this phenomenon is worth watching out for.

He stated, "Although the general view in the market is that a decline in yields is positive for stocks, the current difficult trading conditions are still characterized by falling interest rates and a decline in the NASDAQ index." What needs to be observed next is whether the weakness in semiconductor stocks will spread to the 'Big Seven' of U.S. stocks.

Burry stated, "We have already seen semiconductor stocks decline in tandem with interest rates, but if we ultimately see the 'Big Seven' of U.S. stocks also fall with interest rates, then that will further reinforce our assessment of a 'bloody October'."

JPMorgan Chase warns: This round of tech stock plunge is completely different from July! Retail investors have given up on bottom-fishing, and their ammunition for driving prices down is exhausted.

JPMorgan Chase' latest research report indicates that the current downward environment for AI infrastructure stocks is significantly worse than the adjustment in July last year. Retail investors have so far lacked the behavior of 'buying on dips'. Coupled with multiple unfavorable factors such as a cliff in repurchase volumes, thin short positions, and relatively high levels of leverage ETF, the technical support for this round of rebound is much weaker than that of the last time.

The team led by strategist Nikolaos Panigirtzoglou concluded, after comparing key indicators such as capital flows, short positions, ETF structures, and corporate repurchases one by one, that the current market lacks the multiple key catalysts that drove a rapid recovery in stock prices after the adjustment in July last year.

The report also points out that despite recent pullbacks, cyclical stocks have not entered an oversold territory in terms of position size and capital flow, which means that downside risks remain significant. A full recovery of cyclical stocks requires a combination of multiple factors such as declining bond yields, strong earnings, and a stabilizing labor market.

Focus on Individual Stocks

Cloud infrastructure technology company CoreWeave saw its stock price fall for the second consecutive day, dropping by 6% before trading on Thursday. Investors are concerned that a number of tech companies, including CoreWeave, have already incurred too much debt in their investments in artificial intelligence development.

Rocket Lab tumbles nearly 10%; the company announces that the launch of the "Neutron" rocket will be postponed to 2027.

SK Hynix falls by over 7%, market concerns about AI excessive financing in industry construction. Previously, the South Korean Composite Index (Kospi) had already tumbled 7.6% overnight, further dragging down this stock.

Penske Auto Group surges by 8%. Penske The group, along with the acquisition entity under Mitsui & Co., Motown Acquisition Corp, announced that they will privatize the company, with the acquisition cash price of $212 per share. Compared to the closing price of $194.79 on Wednesday, this acquisition represents a premium of nearly 9%, and the transaction is expected to be completed in the first quarter of 2027.

Wal-Mart's stock price rose by more than 2%. Deutsche Bank raised its rating on the stock from "Hold" to "Buy," expressing optimism about its prospects for 2027. The bank expects the company's margin growth to improve and noted that the current inflation environment is conducive to Wal-Mart's ability to attract consumers.

Shoe company Crocs's stock price rose by nearly 2%. Barclays upgraded its rating from 'neutral' to 'overweight'. Analyst Adrian Ihe gave the reasons for the upgrade: the company has made progress in product innovation and category expansion, and its overseas business has seen growth.