The news that the U.S. government shutdown would be resolved over the weekend directly fueled a strong rebound in U.S. stocks on Monday. When investors began to believe that the market would return to its steady upward trend of setting new highs with ease, the U.S. stock market underwent major adjustments this week. Whether it was leading AI technology giants with robust earnings growth, such as $NVIDIA (NVDA.US)$Microsoft, or high-elasticity and high-momentum AI-focused names like $CoreWeave (CRWV.US)$、 $NEBIUS (NBIS.US)$, they all experienced significant pullbacks.

What caused this week’s turbulence in the U.S. stock market? How will the market evolve in the near future? What events should be closely watched, and what strategies can be deployed?

The Longest Shutdown in History Just Ended, but the Rate Cut Dream Has Been Put on Hold

This round of 'major tremors' in the U.S. stock market was not triggered by a single event, but rather the result of three intertwined forces: an economic data vacuum + unclear rate cut trajectory + highly valued growth stocks concentrated in the AI sector.

Just after the U.S. government ended a shutdown lasting approximately 43 days, the Bureau of Labor Statistics and the Bureau of Economic Analysis indicated that some employment and inflation data would most likely 'miss their historical record' and could not be fully recovered, leaving long-term gaps in certain key indicators.

The impact on the Federal Reserve is very direct: before the December FOMC meeting, policymakers will have to rely on only a very limited set of data to assess economic conditions.

The market had previously bet on 'three consecutive rate cuts throughout the year,' but now, amid missing data, a weakening economy, and unclear inflation trends, whether to continue cutting rates in December has clearly shifted from being a 'high-probability event' to becoming 'controversial.'

According to CME FedWatch data, the swaps market shows that the probability of a rate cut in December has now dropped to 50%, a significant decline from about 70% a week ago.

AI-related stocks fell broadly, with sentiment for popular names clearly retreating.

Macroeconomic uncertainty was merely the trigger; what truly caused the index to 'lose its center of gravity' was that funds which had enthusiastically flowed into the AI sector over the past two weeks suddenly switched to emergency risk-aversion mode, shifting into sectors such as finance, healthcare, and consumer goods, driving the Dow Jones Industrial Average to a recent逆势 high.

On Thursday, November 13, the Nasdaq Composite fell by 2.29%, marking one of its worst single-day performances in about six months, with the main drag on the index coming from previously leading AI-related stocks: NVIDIA fell more than 3%, $Palantir (PLTR.US)$and Broadcom saw declines in the range of 4%–7%.

Over the past week, discussions about an 'AI bubble' have heated up dramatically on Wall Street, further fueled by prominent figures such as Michael Burry, the prototype for the Big Short.

• Some institutions have pointed out that the valuations of AI leaders, represented by NVIDIA, have significantly exceeded their intrinsic value after their stock prices surged several-fold over the past two years.

• Even for some AI beneficiaries that reported 'better-than-expected' earnings, their stock prices still plummeted. For example, Palantir's shares fell approximately 8% in one go despite announcing strong financial results and raising its full-year guidance. Other AI-related stocks such as Applovin and Broadcom also exemplify the pattern of 'peaking upon positive news realization.'

• AI concept stocks with flawed earnings reports experienced even sharper pullbacks, such as CoreWeave and NEBIUS, which saw cumulative declines exceeding 10% post-results.

From a market structure perspective, this round of widespread AI stock declines can be analyzed along two main lines:

• Leader correction: Companies like NVIDIA, Microsoft, and Meta boast robust profitability and cash flow, with AI revenue growth from data center/cloud businesses remaining significant. The primary issue for these stocks is valuation compression, where rising interest rate expectations drag down price-to-earnings (P/E) ratios and price-to-sales (PS) multiples from previously elevated levels.

• Second-tier, high-volatility names experiencing bubble bursts: SaaS, advertising, and neoCloud companies that soared on the AI hype generally exhibit weaker profitability but saw stock price increases far outpacing fundamentals.

Oracle is a typical example, having surged 35% in a single day following the announcement of a mega long-term deal with OpenAI, only to subsequently erase all those gains.

Key focus over the next month: NVIDIA earnings report, rate cut expectations

How the market will evolve next hinges on: 'Gradual economic data recovery + After NVIDIA releases its earnings, how the market re-narrates the stories of AI and interest rates.'

NVIDIA Earnings Report: The 'Final Exam' for AI Bulls

NVIDIA will release its Q3 earnings report after the market close on Wednesday, November 19. Consensus estimates suggest that revenue for this quarter is expected to be approximately USD 54.5–55 billion, driven by continued strong growth from data center GPUs based on the Blackwell architecture.

Given NVIDIA's pivotal position across the entire AI industry chain, the market largely views this earnings report as "one of the turning points for AI-related sentiment":

• If results and guidance once again significantly exceed expectations, and management remains optimistic about order visibility into 2026, AI bulls may see a rebound driven by "restored confidence + short covering."

• If the results are merely 'fairly good' but management adopts a more conservative tone, placing greater emphasis on 'uncertainties' and 'customers digesting inventory,' the AI sector may enter an extended period of high-level volatility.Sector RotationPhase;

• A truly negative scenario would involve revenue or gross margins falling short of expectations, or clear evidence of pressure from cloud providers developing in-house chip alternatives, which would indicate that the correction of AI valuation bubbles is far from over.

Expectations for Rate Cuts: After data recovery, which direction will the path tilt toward?

With the shutdown over, institutions such as the BLS and BEA will gradually resume operations, and the more than 40-day data "gap" will be progressively filled.

Over the next month, several key dates are worth monitoring (Eastern Time):

• From late November: Delayed data releases will be concentrated, and the market will focus on employment, retail, and PPI data to assess whether economic momentum noticeably slowed during the shutdown period.

• Around mid-December: The November nonfarm payrolls and unemployment rate report, the first "complete" employment report after the shutdown, will serve as a critical basis for the Fed to evaluate whether further interest rate cuts are needed to support employment.

• December 10: FOMC interest rate meeting, where the Federal Reserve will decide whether to implement a third consecutive rate cut and update the dot plot to redraw the interest rate path for 2026.

Market-level interpretations can be simplified into three scenarios:

If "soft landingIf the scenario of 'continued interest rate cuts' unfolds, both private and official data indicate a mild slowdown with inflation continuing to decline. A smooth rate cut in December, coupled with forward guidance indicating a continued easing path through 2026, is expected to drive a new round of valuation recovery for growth stocks and AI-related sectors.

If 'economy significantly weakens but inflation remains sticky,' data shows increasing employment pressure and accelerating layoffs, while core inflation remains stubbornly high; the Fed is caught between fighting inflation and protecting growth, diminishing market expectations from rate cuts and negatively impacting overall risk appetite in the stock market.

If 'data is chaotic and the Fed's messaging becomes more ambiguous,' the impact of missing October data persists, with most indicators showing significant noise; the Fed may choose a 'wait-and-see' approach, offering no strong forward guidance on whether to cut rates in December, leaving the stock market prone to high volatility and fluctuation.

Options Strategy: Protective management risk, covered call

In such a phase characterized by 'high valuations + high volatility + dense key events,' options are more suitable for individual investors as risk management tools rather than short-term lottery tickets.

Protective Put: Adding a 'safety net insurance' to concentrated AI positions.

For those holding significant U.S. technology/AI individual stocks or ETFs (such as NVDA, MSFT, QQQ, SOXX, etc.), remaining optimistic in the long term but wishing to avoid another 10%-level pullback in the short term.

For maturity selection, prioritize coverage spanning NVIDIA’s earnings report and the FOMC interest rate decision, such as mid-to-late December or January next year. If buying Puts alone is too expensive, consider Bear Put Spreads (buying a Put closer to the current price while selling a more out-of-the-money Put) to reduce premium costs by sacrificing extreme tail-end protection.

Covered Call: Reducing holding costs amid high volatility

The Covered Call strategy is highly effective in the current environment, where implied volatility (IV) is elevated, stock price fluctuations are significant, and short-term call premiums are relatively generous.

The idea is simple: if you already hold the underlying asset and do not expect it to reach new highs in the short term, you can consider selling short-term, slightly out-of-the-money calls to collect premiums.

In practice, choose an out-of-the-money (OTM) call option with about one month until expiration and a strike price approximately 5%-10% higher than the current price, applying this on stocks that are likely to remain range-bound and unlikely to break new highs in the coming month.

Possible outcomes:

• If the stock price remains flat or declines slightly: The call option expires worthless, and the premium collected offsets part of the unrealized losses, effectively lowering the overall holding cost;

• If the stock price rises significantly above the strike price: You will be forced to sell the shares at the strike price, locking in a certain profit, but at the cost of giving up potential additional upside gains.

This strategy is suitable for medium- to long-term investors who have confidence in the long-term outlook but seek to “gradually adjust” their positions in the short term and are psychologically prepared to accept being exercised out of their position after a modest gain.

Overall, the AI industry cycle is far from over, but in a phase of uncertain interest rates, relatively high valuations, and temporarily “blind” data points, the market will scrutinize earnings and cash flows more rigorously. NVIDIA’s earnings report is the most critical validation point in the near term.

From a strategic perspective, rather than frequently chasing rallies and cutting losses amidst volatile sentiment swings, it is preferable to employ options strategies such as protective puts and covered calls to transform this period of high volatility into more manageable costs and clearer profit-and-loss parameters.

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Editor/Ray