A new wave of tech stock sell-offs is shaking Wall Street.
The longest government shutdown in U.S. history has ended, but a storm hit the U.S. stock market overnight.
Driven by factors such as the absence of economic data, divergence within the Federal Reserve between hawks and doves, and the cooling of AI-related trading sentiment, panic on Wall Street has been escalating.
On Thursday, the three major U.S. stock indices closed with their worst single-day performance in over a month.
The Dow plummeted nearly 800 points, while leading technology stocks and chipmakers suffered heavy losses.
Tesla plunged more than 6%, wiping out $95.2 billion (approximately RMB 675.5 billion) of its market value overnight; Intel fell over 5%, while Broadcom, Oracle, and AMD dropped more than 4%, and NVIDIA and Micron Technology declined over 3%.
A more severe storm?
A new wave of tech stock sell-offs is shaking all of Wall Street.
Although the end of the U.S. government shutdown brought brief optimism to the market, it seems an even fiercer storm may be approaching.
At present, market focus has shifted to a large amount of delayed economic data, uncertainties regarding the Federal Reserve's interest rate cut prospects, and concerns over highly-valued technology stocks.
This, in turn, triggered a broad sell-off in star technology stocks and risk assets, with the market once again entering 'risk-off mode.'
Last night, the U.S. October CPI data was again absent.
Kevin Hassett, White House economic adviser, stated outright that the U.S. Q4 GDP growth is expected to decline by 1.5 percentage points due to the 'shutdown'; the October non-farm payroll report will be released without unemployment rate data.
The U.S. government shutdown has created a significant economic 'data vacuum,' directly undermining market expectations for the Federal Reserve’s interest rate cuts.
Currently, divisions within the Federal Reserve are intensifying. Several Fed officials have recently made cautious remarks, suggesting that interest rate cuts should be approached with prudence.
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis,indicated that he did not support the Fed's previous interest rate cut decision, but remains undecided on the best course of action for the December meeting.
Loretta Mester, President of the Federal Reserve Bank of Cleveland,stated that the Fed should maintain interest rate stability to continue exerting downward pressure on inflation, bringing price growth back to the 2% target.
Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that it is too early to determine whether the Federal Reserve should cut interest rates at the December meeting, as the current policy trajectory appears to be 'relatively neutral.'
Raphael Bostic, President of the Federal Reserve Bank of Atlanta, believes that inflation risks are greater and the Federal Reserve should temporarily refrain from adjusting interest rates.
Federal Reserve's Susan Collinsstated that keeping interest rates unchanged for a period may be an appropriate course of action.
According to data from CME Group, the interest rate futures market indicates that the probability of a rate cut in December has plummeted from over 70% a week ago to around 50%.
The probability of the Federal Reserve cutting interest rates by a cumulative 25 basis points by January next year stands at 50.2%, with a 30.2% chance of maintaining the current interest rate and a 19.6% likelihood of a cumulative 50-basis-point cut.
The 'Big Short' Makes a Timely Exit
Michael Burry, the prominent 'Big Short' known for his high-profile short positions against NVIDIA and Palantir, has further fueled concerns about an AI tech bubble in the U.S. stock market.
According to the 13F report disclosed at the beginning of this month for the third quarter, approximately 80% of Scion Fund’s portfolio was concentrated in short positions against NVIDIA and Palantir, with a nominal value exceeding US$1 billion. This revelation shocked the market and attracted widespread attention.
However, he clarified that the so-called "US$912 million short position" was merely a mathematical error by the media – his actual invested capital was only US$9.2 million.
Recently, Burry took to social media to criticize tech giants for fraud, accusing them of understating depreciation by artificially extending the 'useful life' of assets, thereby inflating profits. He described this as 'one of the most common forms of fraud in modern times.'
According to his estimates, by 2028, Oracle's earnings may be overstated by 26.9%, while Meta’s could be inflated by 20.8%, potentially worsening further.
He also warned of risks associated with NVIDIA (NVDA), Palantir (PLTR), Microsoft (MSFT), Alphabet (GOOGL), Oracle (ORCL), and Meta (META).
However, it is worth noting that Burry suddenly liquidated his positions in a flash.
It is reported that his Scion Asset Management had deregistered from the U.S. Securities and Exchange Commission (SEC) on November 10.
A letter allegedly sent by Burry to investors at the end of last month has been circulating online. In the letter, he wrote:
"With a heavy heart, I will liquidate funds and return capital before the end of the year – though a small amount will be deducted for audit/tax purposes."
My estimate of the securities' value is now inconsistent with the market, and it has been for a while.
In addition, Barry also hinted on social media platforms that significant news would be announced on November 25th.
He posted a still from 'The Big Short,' metaphorically implying that 'the present moment mirrors the past,' and that everything will eventually come to light.
As for Burry’s eagerness to liquidate his positions and exit the market, speculation suggests his “retreat” may merely be preparation for another 'big short.'
The EndGame Macro analysis team offered a particularly 'gracious' interpretation:
“Burry is reprising his role from 2005—back then, he saw through financial institutions packaging junk collateral into 'AAA'-rated products; today, what he sees are trillion-dollar tech empires built upon aggressive accounting practices and cash-burning capital expenditures.
His choice to 'exit' stems from fiduciary integrity. Given the vast divergence between the fund manager's judgment and market reality, rather than struggling through the final stages of a bubble, it is more honest to return clients’ money and stop participating in this frenzy.”
