The Zhitong Finance App learned that on Thursday, the three major US stock indices fell sharply. The Democratic Party won both houses of the US Congress in the midterm elections, causing the market to worry that most of the new legislation will tighten supervision of artificial intelligence (AI) related spending and data center construction, and a political shock wave has delayed detonation in the stock market. Technology stocks were “bloodwashed,” and the AI hardware industry chain was sold off collectively. The “Panic Index” VIX soared. Oil prices are rising. Gold rushed higher and retreated.
[US Stocks] At the close, the Dow Jones Index fell 1833.06 points, or 3.44%, to 51523.06 points; the S&P 500 index fell 334.89 points, or 4.36%, to 7353.73 points; the Nasdaq Composite Index fell 1421.52 points, or 5.52%, to 24315.00 points.
The Democratic Party's control of Congress in the midterm elections raised market concerns about stricter regulation of the AI industry. The AI hardware industry chain was sold off collectively, and the chip, storage, semiconductor equipment, and optical communication sectors generally fell sharply. The Philadelphia Semiconductor Index plummeted 12% in a single day, the biggest drop since 2020. Nvidia (NVDA.US) fell 9% in a single day, with all of its gains during the year; AMD (AMD.US) fell more than 17%. Storage stocks were “bloodwashed,” and SanDisk (SNDK.US) plummeted 22%, while Western Digital (WDC.US) and Micron Technology (MU.US) fell more than 17%. TSM.US (TSM.US) fell nearly 11%, and ASML.US (ASML.US) fell more than 9%. Lumentum (LITE.US) and Credo Technology (CRDO.US) fell nearly 18%, and Mewell Technology (MRVL.US) fell more than 16%. Individual stocks related to Xinyun also experienced a sell-off, and CoreWeave (CRWV.US) fell another 10%. Furthermore, the “Panic Index” VIX surged 70% to its highest level since the beginning of April.
[European stocks] The German DAX30 index fell 112.66 points, or 0.43%, to 26325.01 points; the UK FTSE 100 index fell 46.55 points, or 0.43%, to 10782.66 points; the French CAC40 index rose 27.48 points, or 0.34%, to 8205.37 points; the European Stoxx 50 index fell 17.86 points, or 0.29%, to 6247.85 points; Spain's IBEX35 index rose 115.10 points, or 0.59%, to report 19486.00 points; Italy's FTSE MIB index fell 525.15 points, or 1.03%, to 50505.87 points.
[Asia Pacific Stock Market] The Nikkei 225 Index fell 1.79%, South Korea's KOSPI Index fell 5.28%, India's BSE SENSEX rose 2.60%, and the Indonesian Composite Index rose 2.25%.
[Foreign Exchange] The US Dollar Index (DXY), which measures a basket against six major currencies, rose 0.02% to 101.58.
[Cryptocurrency] Cryptocurrency is falling. In the past 24 hours, Bitcoin fell more than 6% to $7.53, taking back all of the gains of the previous day; Ethereum fell nearly 9% to $2210.7.
[Precious Metals] At the end of the New York session on Thursday (November 5), spot gold rose 0.7% to 4089.15 US dollars/ounce. It was rising almost throughout the day. Early Asia Pacific trading rose significantly, then fluctuated and declined. US stocks showed a W-shape trend in early trading. Spot silver fell 0.84% to $51.7798 per ounce.
[Crude oil] WTI's December crude oil futures closed up $2.40, or more than 2.72%, to $90.52 per barrel, breaking away from the lowest closing level of $88.12 since October 7, and continued to rise since mid-day trading in the Asia-Pacific region. Brent crude oil futures for January closed up $3.67, or nearly 3.88%, to $98.29 per barrel.
[Metals] LME copper closed down $168 to $13,844 per ton. LME aluminum closed higher at $17 to $3,064 per ton. LME zinc closed down $14 to $3,793/ton. LME lead closed higher by $12 to $1,894/ton. Nickel in the LME period closed up $543 to $16,322 per ton. LME tin closed down $1,516 to $45,479 per ton. The LME period cobalt is over.
[Macro News]
Goldman Sachs Trading Desk “The phone was blown up but buyers couldn't wait”: the midterm election results triggered a decline in AI trading, and the NASDAQ evaporated more than 2 trillion US dollars in a single day. Overnight in US stocks on Thursday, Goldman Sachs Group's stock trading desk was flooded with investor inquiries — everyone was asking the same question: How deep will the tech sell-off go? However, it was hard to find buyers who actually took over the market. According to John Flood, head of Goldman Sachs American Equities Executive Services, Wednesday (midterm election day) is one of the busiest trading days for the bank's stock exchange during the year. By Thursday, the style of painting was quite the opposite. “Today was completely reversed,” Flood wrote in a report to customers on Thursday. “Our phone calls were bombarded with all kinds of calls asking about the market. Unfortunately, we haven't seen much (actual transactions).” According to Flood, long-term investment institutions (long-only) have once again fallen into a wait-and-see freeze. This group of investors, who previously aggressively cut their risk exposure before the midterm elections, was caught off guard by Wednesday's rebound and re-attracted back to the market — now hedge funds are selling artificial intelligence hyperscaler (hyperscaler) stocks they had just bought the previous trading day. What worries the market even more is the lack of buying orders. According to feedback from Goldman Sachs customers, brokerage brokers with large retail exposure reported that retail investors had a significant net sales imbalance for the second day in a row.
The market is betting that the probability of interest rate hikes in December will drop to 70%: the hawks in the Federal Reserve insist on “walking slowly.” On Thursday, two Federal Reserve officials publicly advocated a small, steady rate hike to deal with inflation that is still above target. This is the first round of public rhetoric from central bank officials after the Democratic Party won control of Congress and expanded its seat at the state level, potentially changing the path of price pressure in the economy. Cleveland Federal Reserve Chairman Beth Hammack said in a speech before an event in Zurich: “I expect monetary policy will need to shift to a restrictive stance and pull inflation back to 2% in time.” One of the strongest supporters within central banks who insist on raising interest rates believes that “where possible, this position should be achieved through more frequent minor adjustments” — an approach that is less disruptive to households, businesses, and financial markets. She also said that gradual interest rate hikes will also help prevent an “inflationary mentality” from taking root among the public. Richmond Federal Reserve Chairman Thomas Barkin echoed Hammack's path judgment in his speech in Charlotte. He said that inflation is “too high” and is “trading at a high level” rather than falling. For central bank officials, “the meaning of the policy is quite straightforward,” and as for the pace of future interest rate hikes, “it is reasonable to gradually.”
US bonds are highly sought after, and the curve of the bull market has steeper. The collapse of the stock market provided strong safe-haven buying support for US Treasury bonds. On Thursday, the 10-year US Treasury yield fell by about 6 basis points to 4.83%. The 2-year yield had already accumulated a decline of about 17 basis points before choosing. The yield curve showed a typical steep bull market trend. The US bond market interprets the Democratic Party's sweeping Congress more as a sign of fiscal restraint — the political impasse between the Republican White House and the Democratic Congress may restrict the Trump administration's legislative agenda to push forward tax cuts and spending expansion, thereby reducing supply expectations for mid-term US debt issuance. Meanwhile, according to reports, South Korea is reportedly considering large-scale purchases of long-term US bonds as one of the measures to increase foreign exchange reserves and strengthen economic ties with Washington to provide potential incremental support for US debt demand. Although South Korea has denied media reports that the government is considering large-scale purchases of US long-term treasury bonds to increase foreign exchange reserves.
[Individual Stock News]
IREN (IREN.US) Q1 AI cloud revenue surged 182% month-on-month, with a $20 billion backlog of orders. The company achieved revenue of US$228 million for the quarter, up 66% month-on-month, better than market expectations of US$221 million; net loss of US$263 million, a sharp narrowing from the previous quarter's US$684 million; adjusted EBITDA of US$66 million, a sharp increase of 247% month-on-month, and an adjusted EBITDA margin of 29%; loss per share was 66 cents, and the market expects a loss of 48 cents per share. The AI cloud business is the absolute protagonist of this quarter. AI cloud revenue for the quarter reached US$200 million, up 182% month-on-month (US$71 million in the previous quarter), of which AI cloud service revenue was US$135 million and AI cloud rental revenue was US$65 million; the AI cloud division's gross margin reached 86%, the same as the previous quarter. The core driver of the revenue jump was the delivery of the Horizon 1 data center. The company's operating IT capacity (IT-MW) increased 127% month-on-month, from 41 megawatts to 93 megawatts (about 0.1 GW).
Airbnb (ABNB.US) Q3 accelerated across the board: revenue growth of 19% was the fastest in more than three years, adding $12 billion in repurchases, and raising full-year guidance. According to financial reports, Airbnb achieved revenue of 4.87 billion US dollars in the third quarter, up 19% year on year (up 16% in fixed exchange rate), exceeding market expectations of 4.75 billion US dollars, the fastest revenue growth rate in more than three years; total bookings (GBV) of 27.7 billion US dollars, up 21% year over year, up 5 percentage points from month to month; overnight and seat reservations reached 155 million, up 16% year on year — a significant increase from 10% in the second quarter and 9% in the same period last year. The profit side was also strong: net profit of US$1.89 billion, up 38% year over year, and net interest rate of 39%; diluted earnings per share of $3.16, better than market expectations of $2.85 ($2.21 in the same period last year). The return on capital increased significantly: the company repurchased $700 million of Class A shares this quarter and announced additional repurchase authorizations of up to $12 billion — adding the remaining $2.7 billion in previous authorizations, for a total of nearly $15 billion in “ammunition”.
The Q3 results and guidance all exceeded expectations, and Cloudflare surged after the market. According to financial reports, Cloudflare's adjusted earnings per share (EPS) for the third quarter was $0.38, and analysts expected $0.35; adjusted operating profit for the third quarter was US$137.1 million, analysts expected US$130.1 million; revenue for the third quarter was US$782.5 million, and analysts expected US$741.6 million. The company expects annual revenue of around US$2.96 billion, originally estimated at US$2.86 billion to US$2.87 billion; revenue for the fourth quarter was estimated at US$845 million to US$846 million, and analysts expected US$799 million.
Amid the credit decline caused by technology stocks, SpaceX (SPCX.US) default risk reached a record high. As market concerns about tightening regulations on the AI industry have resumed, Musk's space exploration companies SpaceX and CoreWeave have become one of the entities hardest hit by the widespread credit decline. The yield on one of CoreWeave bonds soared to a record high of more than 17%. At the same time, the cost of insuring against SpaceX debt default (CDS, credit default swap) also rose to an all-time high. Market observers warned that the Democratic Party's sweeping victory could strengthen the party's ability to review Elon Musk's actions and hinder the anticipated merger between SpaceX and Tesla (TSLA.US).
Google (GOOGL.US) will invest 17 billion US dollars to build its first data center in Wyoming, USA. Google promised to invest $17 billion to build Google's first data center in Wyoming, and signed binding agreements with Tallgrass Energy, Black Hills Energy, American Electric Power, and Related Digital to bring jobs and infrastructure to Laramie County. Google provided $17 billion in capital, and Bloom Energy provided fuel cell technology. The project includes a 702 megawatt fuel cell development project equipped with carbon capture and storage, and has been signed with the American Electric Power Company (AEP).