The short-term liquidity crisis caused a sharp drop in AI stocks, not because of fundamental problems with AI itself—those are just fabricated stories! Bank of New York Mellon: Why did semiconductor stocks also plummet recently despite strong earnings reports? Because borrowing short-term funds in the market is becoming increasingly expensive. The US government is taking in more money, while the amount of cash available in the banking system is decreasing. I. Why is money tightening? 1. The US government is borrowing heavily in short-term debt. Bank of New York Mellon says that since the beginning of October, net issuance of short-term Treasury bonds has increased by more than $260 billion. Investors buying Treasury bonds need to withdraw cash, further tightening the money available in the short-term funding market. 2. Increased funds in the Treasury's accounts. Money borrowed by the government first enters the Treasury's account at the Federal Reserve. On November 3, when TGA exceeded $1 trillion, bank reserves briefly fell below $2.9 trillion. Money is flowing from the banking system into government accounts, temporarily not circulating in the market. 3. The cost of borrowing in the market is rising. Short-term borrowing rates in the repo market, SOFR and TGCR, have both risen above bank reserve requirements. The higher cost of overnight borrowing for institutions is a signal of tight liquidity. II. When might things improve? On November 3rd, BNY Mellon projected that the New York Fed might resume "reserve management bond purchases" around mid-November to help the banking system replenish cash and alleviate short-term funding pressures. BNY Mellon also warned that if a large amount of short-term debt continues to be issued in the first quarter of 2027, pressure could reappear. III. How will this affect the semiconductor industry? Tight market cash → Higher borrowing and financing costs → Institutions reduce risk and leverage → Sell off previously most crowded AI and semiconductor holdings → Stock prices fall. Meanwhile, large-cap tech and AI data centers need to borrow money for construction. Widening credit spreads mean higher financing costs, leading to market concerns: if financing becomes more difficult, will data center construction slow down, and will chip orders be postponed? Stock prices reflect future expectations, so even if today's orders are strong, stock prices will fall first.