Source: BIT Securities

Last night, after waking from a sleep, those stocks on the US market that rose due to AI narratives in financing and pricing all continued to face stock price corrections.

Whether it is Nvidia, whose servers featuring AI chips have raised prices by over 15%, or Alibaba, which has just raised funds for AI infrastructure by issuing new shares, it seems that those stocks raising prices and financing for AI narratives are all facing relentless corrections.

Finally, last night the US stock market closed, with Nvidia down 3%, marking the seventh consecutive trading day of decline since 2022; while stocks in the storage chip and optical communication sectors, which previously soared mindlessly due to any AI trading narrative, again faced corrections last night. SanDisk fell 6.45%, Micron fell 5.83%, and SK Hynix fell 5%.

To understand the current market attitude toward AI narratives, Alibaba's recent experience is the best starting point.

1. Alibaba raises 80 billion HKD for AI, resulting in a 10% drop in Hong Kong stocks

Alibaba announced plans to place new shares in Hong Kong, raising a total of 80 billion HKD (approximately 10.2 billion USD), with funds directed towards AI infrastructure—this is Alibaba's first share placement since its Hong Kong IPO in 2019, with all chips placed on AI.

Six months ago, this would have been seen as a positive catalyst for stock prices. But the reality is that Hong Kong stock prices plummeted 10% in response. In a critical moment, management urgently took action: Group Chairman Cai Chongxin and CEO Wu Yongming each bought back about 120 million HKD worth of their company's stock, barely stabilizing the situation and preventing Alibaba's stock price in the US market from further declining.

The boss personally putting money into stabilizing the market speaks volumes—this action itself explains everything.

2. The market's tastes have completely changed

What was the AI trading atmosphere in the first half of the year? No attention to profits, no attention to cash flow, only looking at vast dreams, comparing whose imagination is larger. As long as the story is compelling, the funds dare to give valuations.

Now, this approach is no longer accepted. The market has started to scrutinize the books: revenue must be presented, cash flow must be shown, and shareholders must get dividends and buybacks. Upon the release of Alibaba's 80 billion share placement news, investors' first reaction was not "AI infrastructure has great potential," but rather "my shares are going to be diluted again."

Nvidia's position is the other side of the same coin. Raising server prices by over 15% was previously interpreted as a strong positive for the industry chain—upstream price increases signaled strong demand, benefiting storage companies. But now, this news simultaneously ignites two types of panic: downstream concerns about uncontrolled AI hardware costs and pressured investment returns; upstream shareholders are murmuring whether the company is only focused on expanding production and neglecting dividends.

The same action that was positive six months ago is seen as negative today. What has changed is the set of rules the market has established for AI narratives.

3. The US Treasury has intervened again, but the market remains skeptical

In addition to the weakness of AI narratives, the macro pressure from US treasuries is also dragging down the market.

Last night, the US Treasury once again attempted to stabilize the market: officials stated that they would tap the TGA account—the Treasury's "checking account" at the Federal Reserve, holding nearly a trillion dollars—directly purchasing long-term government bonds to lower yields.

It sounds impressive, but the market understands the reality: this money will not be fully available for bond purchases; government daily expenses and maturing debt service must come from this source, and the actual amount that can be mobilized is far less exaggerated. Thus, the reaction was quite lukewarm: US treasury yields briefly dipped before quickly rebounding, with the 30-year yield still hovering around the high level of 5.246%, remaining unchanged.

4. All eyes are on Waller this Friday

With fiscal measures continuously failing, the market's attention has naturally shifted entirely to the Federal Reserve.

This Friday, Federal Reserve Chairman Waller will give a speech at the Jackson Hole Economic Policy Symposium. This is bound to be the most anticipated central bank speech of the year: since taking office in May, Waller has offered almost no forward guidance to the market, and what he says and how he says it will be dissected word by word.

The market wants to know just one answer: facing inflation that has consistently remained above the 2% target and a continuously deteriorating fiscal situation, what exactly does the Federal Reserve intend to do?

After all, the Treasury Secretary can only play with technical moves like adjusting the maturity structure of debt; the real entity capable of anchoring inflation expectations is only the Federal Reserve. Before Friday, the market is likely to only oscillate anxiously.

5. In conclusion

Looking at the recent market situation as a whole, it can be observed that the market is simultaneously undergoing two "trust reassessments."

One is concerning AI narratives: switching from listening to stories and valuing dreams to examining the books and demanding cash flow. The sell-off of Alibaba’s share placement and the panic following Nvidia's price increase are essentially the same test—what is the return rate of AI investments, let's take a look. This reassessment will not end in a day or two, and the dramatic fluctuations in high-interest sectors are likely to be the norm in the coming days.

The other is regarding US fiscal issues: the Treasury has intervened twice, and the market has shown cold responses twice. Using technical buybacks and TGA announcements cannot suppress the yield rates driven up by inflation, deficits, and bond issuance. The tools available are dwindling, and market patience is thinning.

The intersection of these two reassessments is the Jackson Hole meeting this Friday. Waller's words might simultaneously determine the valuation anchor for AI stocks and the interest rate anchor for US treasuries.

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