AI market reshuffle! From a sharp decline in chip stocks to a counter-trend surge in AppLovin, where is the market heading?
1. Why the Drop: Policies as the Fuse, Crowded Positions as the Gunpowder
The triggering factor is local opposition to data centers. According to Redbud Consulting, 38 out of 44 local referendums restricting data centers across the U.S. passed; exit polls show that 76% of voters oppose building data centers in their communities (all reported). Senator Sanders subsequently called on social media for an "immediate nationwide halt to data center construction."
It is important to clarify that this is merely a political statement; there is no bill text, nor has it entered congressional review. There are several steps between local opposition and the profit downgrades of chip companies:
Local opposition to data centers
Federal or state policy tightening
Slowdown in data center construction
Cloud vendors reducing capital expenditures
Decrease in AI hardware orders
Downgrade in profit expectations for chip and storage companies
The stock price on November 5 jumped directly to the last step, with several links in between not yet confirmed. The sharp drop is mainly due to positions: over the past two years, AI hardware has repeatedly received orders and profit validations, leading to highly concentrated capital; any news that might slow capital expenditures would trigger concentrated profit-taking.
This also explains why the declines in storage and AMD are nearly twice that of NVIDIA: they are more sensitive to new data center demand, and their past increases and position concentrations have also been higher. What is happening now is that the market has cut away some overly optimistic capital expenditure assumptions with stock prices, while AI demand itself has not been disproven.
2. Not a Full-Blown Panic: Bonds, Gold, and Currency Did Not Follow the Drop, and the Aftermarket Has Rebounded
Looking solely at stocks, the drop is at a panic level; however, other assets did not collapse alongside. If it were a liquidity squeeze across the entire market, gold would have been sold off to cover margins, and U.S. Treasury yields would have been driven down by panic buying by several basis points; neither of these events occurred.
The aftermarket also began to recover. As of 8:40 AM Beijing time on November 6, Micron was up 5.1%, SanDisk was up 4.8%, AMD was up 4.4%, NVIDIA was up 2.0%, and Nasdaq 100 futures turned up about 0.4%.
However, liquidity is lower in the aftermarket, making gains and losses easier to amplify. Whether the rebound can continue will depend on the regular trading session on November 6: whether the entire AI hardware chain can recover simultaneously, which looks more like a rebound after panic; if NVIDIA stabilizes while storage continues to weaken, it indicates that funds are repricing within the supply chain; if the aftermarket gains quickly disappear, it suggests that deleveraging has not yet ended.
3. Who Stood Firm in the Down Market: Companies That Can Generate Profits
On the same day, the market did not abandon all AI companies but rewarded those that can turn AI into profits.
AppLovin announced its third-quarter report after the market closed on November 4: revenue of $2.185 billion, a year-on-year increase of 55%; net profit of $1.439 billion, a year-on-year increase of 72%, with a net profit margin of about 66%. On the same day that the Philadelphia Semiconductor Index fell by 12%, its stock price rose by about 31% at one point during the day.
Cloudflare was priced according to two different logics in one day. During the day, it followed the AI infrastructure sector and fell by 8.03%; after announcing its third-quarter report, with revenue of $782.5 million, a year-on-year increase of 39% and accelerating growth, its stock price rebounded by 15.1% in the aftermarket, not only recovering the day's losses but also exceeding the previous day's close.
This comparison shows that funds are distinguishing between "companies that rely on others to keep spending" and "companies that have already started making profits."
4. Hong Kong Stocks and Pharmaceuticals: Two Signals That Need to Be Clarified in Timing
Hong Kong Stocks: The rise on November 5 reflects the U.S. stock market from the previous night. When the Hong Kong stock market closed on November 5, trading in the U.S. stock market had not yet started that day, so the movements in the Hong Kong stock market corresponded to the divergence in the U.S. stock market on November 4: platform stocks rose, while computing hardware fell. The Hang Seng Index rose by 3.67%, and the Hang Seng Tech Index rose by 5.55%, with NetEase, Xiaomi, Alibaba, and Tencent rising by 7% to 9%; however, Jiangxi Ganfeng Lithium and Yangtze Optical Fibre and Cable fell by more than 12%. Southbound funds had a net sell of about 21.3 billion Hong Kong dollars that day, and an index rise does not equate to a return of southbound funds.
The true reaction of Hong Kong stocks to this U.S. stock market crash will be seen on November 6: whether platform stocks can maintain their gains and whether computing hardware continues to underperform.
Pharmaceuticals: The policy reassessment occurred on November 4, and November 5 did not show defensiveness. On the day the election results were announced, the S&P 500 healthcare sector rose by 3.06%, and Moderna rose by 13.11%, reaching a 52-week high. The market's reasoning is that with the Democratic Party controlling Congress, the push to cut Medicaid faces increased resistance. However, on November 5, pharmaceuticals followed the broader market down, with Moderna falling by 6.55% and the biotechnology ETF XBI falling by 6.73%, with declines comparable to the Nasdaq 100. Over the two days combined, Moderna still rose by 5.70%.
The next verification point for pharmaceuticals will be around December 11, before the expiration of temporary funding, including whether provisions related to Medicare subsidies and Medicaid are included. If the provisions fall short of expectations, the gains from November 4 may face a pullback.
5. What to Watch Next
This round of decline is either a clearing of crowded positions or a turning point in the AI capital expenditure cycle; the answer lies in three areas: whether restrictive clauses have entered bills or state policies, whether cloud vendors will reduce capital expenditures, and who in the AI hardware chain will stop the decline first. The upcoming verifiable nodes are as follows:
Disclaimer: The content of this article is for general information and market commentary only, compiled based on publicly available information as of the time mentioned in the text. Relevant market data, expectations, and probabilities may change with market conditions. The views and investment strategies quoted from third-party institutions, analysts, or other individuals represent the views of the relevant third parties at a specific time and do not represent BIT's views or recommendations. This article does not constitute investment advice, investment research, solicitation, or recommendation for any securities, investment products, or trading strategies, nor should it be used as the basis for any investment decision. Financial markets carry risks, and securities prices and market performance may fluctuate; past performance and historical market trends do not represent or guarantee future results. Investors should independently assess the relevant risks based on their own circumstances and seek professional advice when necessary. BIT's Hong Kong stock trading services are not offered to residents of Hong Kong or users in other restricted jurisdictions.
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