The seven giants of Wind Information Technology tumbled 1.6% in a single day, with a cumulative decline of 2.87% this week. The storage concept index fell 6.28% on that day. Storage chip stocks SK Hynix ADR fell more than 6.5%, Sandisk fell more than 6.8%, and Micron Technology fell more than 5.6%. Optical communication companies Coherent fell by over 7%. The yield on 10-year U.S. Treasury bonds reversed three consecutive declines. The U.S. dollar index hit a two-week low, while the offshore RMB reached a four-year high during trading. Brent oil rose more than 3% during trading, and U.S. oil continued its seven-day upward trend.
Tech stocks faced a new round of selling pressure, with concerns about the investment profitability of AI and the sudden rise in oil prices creating a dual burden, leading to a decline across U.S. markets on Friday. The Nasdaq tumbled 2% in a single day, and chip stocks closed down for the eighth consecutive trading day, setting a new record for the longest streak of declines since 2008.
On Friday, the Nasdaq 100 index fell by 2.5%, and the S&P 500 index dropped by 1.1%. Cloud computing service provider CoreWeave tumbled 12% in a single day, with its bond yield breaking through 15% this week, and its credit risk rising to levels that usually indicate financial difficulties.
This week, the core contradictions of AI trading have shifted from the growing demand for computing power to financing costs, return on capital expenditures, and corporate profitability. Cloud service provider CoreWeave is under financial pressure, which has further prompted the market to re-examine the financing model for the construction of AI data centers; stocks that previously benefited from the AI investment boom, such as those in storage chips, optical communications, and data center equipment, have also become targets for capital reduction. Media reports indicate that the continuous decline in CoreWeave stock prices has drawn more attention to the financing issues of AI trading, and the financial reports of technology giants in the coming weeks will test whether these high valuations are supported by actual profits.
At the energy level, the settlement price of Brent crude oil closed around $110 per barrel, while the price of West Texas Intermediate (WTI) crude oil in the United States rose by 3.8% in a single day to $101.71 per barrel. Members of both parties in the U.S. Congress have jointly proposed a bill to prevent the Trump administration from implementing the agreement with Moscow that allows Russian diesel to enter the market. Rising energy costs have exacerbated concerns about inflation and have weighed on the bond market, with the yield on 10-year U.S. Treasury bonds rising by 3 basis points to 5.09%.
AI's profitability is under question, and pressure on chip stocks continues
AI Whether infrastructure investment can generate sufficient returns has become a new core issue of contention in the market.
On Friday, U.S. stock markets opened with mixed trends, and subsequently, selling pressure gradually increased. The Dow Jones Industrial Average opened higher and once rose by more than 460 points in the morning session, with a gain of nearly 0.9%, but then turned down, with a decline of nearly 310 points, or about 0.6%, at some point during the midday session. The S&P 500 Index also opened slightly higher before turning lower, with a decline of nearly 1.2% at midday; the Nasdaq Composite Index opened lower and continued to fall, with its closing decline widening to 2.15%.
Among other indices, the NASDAQ 100 index fell by 2.5%, the biotechnology index once tumbled more than 2.5%, and the Philadelphia Semiconductor Index dropped by over 3.5%. Chip stocks continued to weaken, highlighting market doubts about the investment returns and financing models of AI, which have spread from individual companies to the entire industry chain.
AI Industrial chain stocks have become a hard-hit area for selling. The storage concept index fell by 6.28% on that day. Storage chip stocks SK; Hynix fell by more than 6.5%, Sandisk fell by more than 6.8%, and Micron Technology fell by more than 5.6%.
Optical communication company Coherent tumbled by over 7%. Oracle, which has invested heavily in the construction of AI data centers, saw its shares fall by more than 4%. The performance of the AI index was far inferior to that of the S&P index, which excluded AI stocks.
The seven tech giants suffer a major setback. Wind's list of the seven tech giants tumbled 1.6% in a single day, with a cumulative decline of 2.87% this week.
CITIC’s Fawad Razaqzada represents:
This week's price trend indicates that the focus of market discussions is shifting. The question is no longer about how large the market potential for AI is, but whether the substantial investments required to realize this potential will ultimately lead to profits.
As an early entrant into the computing power infrastructure of AI, CoreWeave relied heavily on high-yield debt markets for financing its expansion, which puts it in a particularly vulnerable position given the current high interest rates. Razaqzada pointed out that these risks have begun to spread to the credit market. "This creates a dilemma for AI-related transactions: higher interest rates not only reduce the present value of future cash flows but also increase the financing costs required to support the next phase of growth of the infrastructure that AI depends on."
According to Bloomberg, the annual capital expenditures of tech giants, represented by ultra-large-scale cloud service providers, are approaching $1 trillion, with the majority coming from debt financing. Bloomberg's industry research data shows that although the largest tech companies mostly hold investment-grade credit ratings, fund managers are raising increasing doubts about junk-rated borrowers such as CoreWeave.
Not everyone is willing to follow the trend of cutting valuations. Goldman Sachs' Rich Privorotsky believes that the market has overreacted in some areas: the demand for tokens is still growing beyond expectations, and the forward price-earnings ratio of the Nasdaq has dropped to around 21 times, which is the lowest since the start of this current AI cycle.
U.S. stock funds shift to defensive and energy sectors
The essential consumer sectors in the U.S. stock market closed higher against the trend, with PepsiCo, Mondelez International, and Hershey's all seeing gains. Among the seven tech giants, Apple was the only one to rise, with a gain of 0.43%.
Energy stocks are the most direct beneficiaries of the rebound in oil prices. American oil giants such as Chevron, ExxonMobil, and ConocoPhillips have reached new record highs.
Defensive stocks continued to rise, with Coca-Cola, known as the "American Maotai," increasing by over 2% and setting a new historical high; essential consumer goods and pharmaceutical sectors also strengthened, with Eli Lilly, Walmart, Merck, and Procter & Gamble rising in tandem.
Moderna was the stock with the largest decline among the S&P 500 stocks on that day, falling more than 12% at one point during trading and closing down 7.82%. The U.S. Food and Drug Administration (FDA) rejected the marketing application for its seasonal influenza vaccine mRNA-1010, citing a lack of a "sufficient and rigorous controlled" study design in the phase three clinical trials.
The divergence is more apparent on the weekly chart. This week, the Dow Jones rose by 0.68%, while the Nasdaq fell by 4.48%, resulting in a difference of over 6 percentage points between the two on a weekly basis, the largest since July 2002. On that day, it also coincided with the expiration of monthly options, and VIX briefly broke above 22 during trading, for the first time in four months.
Wash's speech did not reinforce expectations of a rate hike in October
On Friday morning, after the release of September's import and export price and industrial output data, the yield on 10-year U.S. Treasury bonds rose by 3.8 basis points to 5.125%; by the close of trading, this increase narrowed to less than 1 basis point, with the yield at 5.097%, and it reached a high of 5.133% during the day.
This week, the yields for 2-year, 5-year, 10-year, and 30-year bonds declined by 3.8 basis points, 12.4 basis points, 13.4 basis points, and 15.5 basis points respectively. The long-term yields outperformed the short-term yields significantly, resulting in a bull flattening pattern in the yield curve. In just one week, U.S. Treasury bonds have seen their best performance since February.
During a conversation with IMF Managing Director Kristalina Georgieva in Bangkok, Walsh refused to make any statements, merely saying, "I do not predict the outcome of the meeting," and noted that the period between the two meetings was generally in line with the Federal Reserve's expectations. Investors interpreted this as meaning that there would be no further changes in October.
He also added that he does not believe it is appropriate to imply what actions he will take in the remaining time of 2026, while insisting that the Federal Reserve “has already made very clear that we will achieve price stability.” What truly affects the market, according to his assessment, is:
Between the two meetings, the world economy generally met our expectations.
Analysis suggests that for the Federal Reserve, which raised interest rates in September and is expected to do so again this year, these remarks seem to imply subtly that there will be no rate hike at the October meeting.
This week, although market expectations for interest rate hikes in 2026 remain relatively stable (with some fluctuations), expectations for hikes in 2027 have clearly declined.
The team led by Goldman Sachs' chief economist Jan Hatzius writes that, considering Walsh's statement alongside Bowman's remarks about "not feeling a sense of urgency" and Daly's reluctance to make decisions based on limited information, the Federal Open Market Committee will pause its actions in October, reserving the second interest rate hike of the year for December.
The statement from Andrew Mullen, the head of government bond trading at Goldman Sachs, is even more straightforward. For the first time in many years, the market has truly ignored the soaring inflation data, and safe-haven buying has returned. “If I had to put it into words, this market trend still has momentum left.”
Some within the Federal Reserve have already acknowledged this fact. Governor Waller stated earlier this week that rising interest rates are already helping to share some of the workload for the Fed. In other words, tightening monetary policy does not necessarily have to rely solely on raising interest rates; the credit market itself can tighten financial conditions.
The US Dollar Index hits a two-week low, while the offshore RMB reaches a four-year high
In the foreign exchange market, the US dollar index weakened on Friday, signaling the end of its upward trend that had lasted for four consecutive weeks. The US dollar index ( DXY ) fell below 102.00 for two consecutive days, dropping to 101.58 during European trading on Friday, hitting a low not seen since October 6th, with a daily decline of nearly 0.5%.
The weakening of the US dollar has driven the RMB to continue rising. The offshore RMB ( CNH ) has broken through 6.69 against the US dollar for two consecutive days, and US stocks approached 6.6830 in the early session, setting new highs for two consecutive days since July 2022.
On Wednesday and Thursday of this week, the inflation data for the US CPI and PPI were released, both exceeding expectations, which temporarily led traders to increase their bets on further interest rate hikes by the Federal Reserve. However, Walsh's speech on Friday did not reinforce the expectations of a rate hike in October, and coupled with the previous decline in U.S. Treasury yields, the dollar's interest rate advantage has weakened.
The euro has rebounded from recent lows against the US dollar, while the US dollar has been fluctuating around 157.9 against the Japanese yen. Overall, the market is re-evaluating the resilience of US inflation, future interest rate paths, and the investment risks associated with AI. If the selling of tech stocks continues to intensify, the demand for safe-haven assets may continue to affect the trends of major currencies, but whether the US dollar can recover its upward momentum still depends on changes in US interest rate expectations and global risk appetite.
Crude oil prices rose by over 3% in the session, US oil prices saw seven consecutive increases, and gold stabilized above $4,100.
In terms of crude oil, international oil prices fell during trading on Friday, but they still remained at a high level. Brent crude oil had previously risen due to supply risks in the Middle East and traded above $105 per barrel at one point on Friday; US WTI crude oil, on the other hand, fluctuated around $97 per barrel.
In the early session of U.S. stocks, it was reported that members of both parties in Congress proposed a bill to prevent Trump's agreement to relax restrictions on Russian diesel. Following this, crude oil prices accelerated their rise. At the beginning of the midday session of U.S. stocks, U.S. WTI crude oil prices approached $100.90, with a gain of nearly 3% for the day, while Brent crude oil prices neared $109.50, with a daily increase of over 3.5%.
The market continues to focus on the tense situation surrounding the Strait of Hormuz, as well as the impact of related events on global crude oil transportation and supply.
High oil prices also make it difficult for the macro market to completely shake off inflation concerns. Rising energy costs may push up overall inflation and make it more difficult for the Federal Reserve to quickly shift to a loose monetary policy; however, during trading on Friday, investors' focus on the financing risks of the AI industry chain also dominated the direction of the stock market.
By the end of trading on Friday in New York, spot gold was at $4,168.69, down 0.05% for the day, almost closing flat. The option of a rate hike in December is still on the table, which is the main reason limiting its rebound potential. Spot silver was at $56.85, down 0.70%.
This week, the trends for gold and silver have been weak. On Wednesday, affected by the surge in real yields following the release of the Consumer Price Index ( CPI ), the price of gold fell to a two-month low, and the price of silver also plummeted by about 8%. However, as yields declined, both gold and silver prices have rebounded to some extent.
This week, the price of Bitcoin remained relatively stable. On Wednesday, it fell below $82,000, but on Thursday it found support around $80,000 and ultimately stabilized around $81,000.
The market fluctuates wildly; instead of rushing to sell when the trend seems clear, it's better to be prepared in advance! OCO The "two-out-of-one" order allows you to deploy two related orders simultaneously. Once one of them is executed, the other will automatically cancel, enabling you to respond flexibly to various market trends.
Edit / stephen
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