Key Takeaways
- • The U.S. Philadelphia Semiconductor Index (SOX) rose 4.21% on the 6th (local time) after its biggest daily drop since March 2020 on the prior session, while the Nasdaq Composite closed at 24,579.42, up 1.09%.
- • AMD jumped 11.04% and Intel gained 7.71% in a single session, with TSMC's ADR up 6.33% and Qualcomm and Micron each up around 5%.
- • Goldman Sachs data showed hedge fund net leverage fell to 73.4% in October, down 4.2 percentage points and the biggest monthly drop since March, with roughly $20 billion in net technology-stock sales over the prior two weeks.
- • JPMorgan estimated leveraged ETFs sold more than $60 billion in stocks at the close, about 90% of it in technology products, and believes the large-scale deleveraging may have passed its peak.
- • Analysts remain divided on whether the sell-off reflects position unwinding or fundamental AI doubts, and CoreWeave's earnings scheduled for the 10th are seen as a key near-term catalyst.
Summary
U.S. artificial intelligence and semiconductor stocks rebounded sharply on the 6th (local time) after a steep sell-off, as investors bought at lower prices. The Philadelphia Semiconductor Index (SOX), which had posted its largest daily decline since March 2020 in the prior session, rose 4.21%. The tech-heavy Nasdaq Composite closed at 24,579.42, up 1.09%, and the S&P 500 gained 0.31%.
Individual names led the recovery. AMD rose 11.04% in one day and Intel, which had recently plunged, gained 7.71%. Taiwan Semiconductor Manufacturing Company's U.S.-listed ADR climbed 6.33%, while Qualcomm and Micron each posted gains of about 5%. Chief strategist Adam Turnquist of LPL Financial said AI had been tested several times in this uptrend and had survived each time, dispelling concerns on each occasion. Analysts said investors may have overreacted to policy uncertainty over AI-related regulation that emerged after the Democratic Party won the U.S. midterm elections.
The sell-off's cause is contested. According to Goldman Sachs, hedge fund net leverage, which measures buying positions relative to selling positions, fell to 73.4% in October, down 4.2 percentage points from the prior month and the largest monthly decline since March. Goldman estimated net technology-stock sales of about $20 billion over the preceding two weeks. Morgan Stanley reported that equity hedge funds' position reduction in October was the largest in more than a decade. JPMorgan said trend-following CTA funds increased selling as indexes fell, and estimated leveraged ETFs sold more than $60 billion in stocks at the close, roughly 90% of it concentrated in technology products such as semiconductors and Nasdaq 100 funds.
Some institutions interpret the move as the unwinding of overcrowded positions rather than a erosion of AI growth prospects. Deutsche Bank upgraded its rating, arguing the decline in large technology stocks was excessive. Wells Fargo said investors have begun to scrutinize AI investment returns and monetization capacity company by company. JPMorgan believes large-scale deleveraging may have passed its peak, implying gradual improvement in supply and demand. Some observers caution that the pattern of declines and rebounds could repeat until policy uncertainty is resolved. CoreWeave, an AI infrastructure company, is scheduled to report results on the 10th, and market participants will watch whether demand for AI infrastructure and memory price expectations remain firm.
Individual names led the recovery. AMD rose 11.04% in one day and Intel, which had recently plunged, gained 7.71%. Taiwan Semiconductor Manufacturing Company's U.S.-listed ADR climbed 6.33%, while Qualcomm and Micron each posted gains of about 5%. Chief strategist Adam Turnquist of LPL Financial said AI had been tested several times in this uptrend and had survived each time, dispelling concerns on each occasion. Analysts said investors may have overreacted to policy uncertainty over AI-related regulation that emerged after the Democratic Party won the U.S. midterm elections.
The sell-off's cause is contested. According to Goldman Sachs, hedge fund net leverage, which measures buying positions relative to selling positions, fell to 73.4% in October, down 4.2 percentage points from the prior month and the largest monthly decline since March. Goldman estimated net technology-stock sales of about $20 billion over the preceding two weeks. Morgan Stanley reported that equity hedge funds' position reduction in October was the largest in more than a decade. JPMorgan said trend-following CTA funds increased selling as indexes fell, and estimated leveraged ETFs sold more than $60 billion in stocks at the close, roughly 90% of it concentrated in technology products such as semiconductors and Nasdaq 100 funds.
Some institutions interpret the move as the unwinding of overcrowded positions rather than a erosion of AI growth prospects. Deutsche Bank upgraded its rating, arguing the decline in large technology stocks was excessive. Wells Fargo said investors have begun to scrutinize AI investment returns and monetization capacity company by company. JPMorgan believes large-scale deleveraging may have passed its peak, implying gradual improvement in supply and demand. Some observers caution that the pattern of declines and rebounds could repeat until policy uncertainty is resolved. CoreWeave, an AI infrastructure company, is scheduled to report results on the 10th, and market participants will watch whether demand for AI infrastructure and memory price expectations remain firm.
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