Last night, upon waking, all those stocks on the U.S. market that had been rising and fundraising based on the AI narrative continued to experience price corrections.
Whether it was NVIDIA, which recently raised the price of servers equipped with AI chips by over 15%, or Alibaba, which just announced plans to issue new shares to finance AI infrastructure—those raising prices and fundraising for the AI narrative seem to be facing continuous pullbacks.
By the close of the U.S. market last night, NVIDIA was down 3%, marking its seventh consecutive day of decline since 2022; stocks in sectors like memory chips and optical communications, which used to surge indiscriminately on any AI trading narrative, experienced another round of pullbacks last night. SanDisk fell 6.45%, Micron dropped 5.83%, and SK Hynix declined 5%.
To understand the market's current stance on the AI narrative, Alibaba's recent experience serves as the best entry point.
1. Alibaba Raises HK$80 Billion for AI, Triggers 10% Plunge in Hong Kong Shares
Alibaba announced plans to place new shares in Hong Kong, raising a total of HK$80 billion (approximately US$10.2 billion), with funds directed towards AI infrastructure—this marks Alibaba's first share placement since its Hong Kong listing in 2019, placing all bets on AI.
Six months ago, this would have been news to ignite the stock price. The reality, however, was a 10% plunge in Hong Kong shares. In a critical moment, management urgently stepped in to put out the fire: Group Chairman Joseph Tsai and CEO Eddie Wu respectively purchased approximately HK$120 million worth of the company's own shares, barely stabilizing the situation and preventing Alibaba's U.S.-listed shares from further decline.
The fact that the bosses personally stepped in to buy shares to support the price says it all.
2. The Market's Taste Has Completely Shifted
What was the style of AI trading in the first half of the year? Ignoring profits, ignoring cash flow, focusing only on the grand vision, competing on whose imagination space was bigger. As long as the story was compelling enough, capital dared to assign valuations.
Now, this playbook finds no takers. The market is opening the account books: show the revenue, show the cash flow, and also return money to shareholders through dividends and buybacks. When news of Alibaba's HK$80 billion placement emerged, investors' first reaction wasn't "AI infrastructure holds great promise," but "here comes another dilution of my shares."
NVIDIA's situation is the flip side of the same coin. Raising server prices by over 15% would have been interpreted as the hardest positive news for the supply chain in the past—upstream daring to raise prices indicates strong demand, benefiting memory chip makers. Now, this piece of news simultaneously ignited two types of panic: downstream worries about uncontrollable AI hardware costs and pressure on investment returns; upstream shareholders mutter about whether the company is only focused on expanding production, neglecting dividends.
The same action was a positive six months ago; today, it's a negative. What has changed are the rules the market has set for the AI narrative.
3. U.S. Treasury Tries Market Rescue Again, Market Remains Unconvinced
Beyond the weakening AI narrative, macro pressures from U.S. Treasuries continue to weigh on the broader market.
Last night, the U.S. Treasury Department attempted another market rescue: officials stated they would utilize the TGA account—the Treasury's "checking account" at the Federal Reserve, holding nearly a trillion dollars—to directly purchase long-term Treasuries, lowering yields.
It sounded impressive, but the market knows perfectly well: this money cannot possibly all be used to buy bonds; government operational expenses, principal and interest payments on maturing debt, all must come from here. The actual usable amount is far less dramatic. Consequently, the reaction was quite tepid: Treasury yields briefly dipped before quickly rebounding, with the 30-year yield remaining stubbornly high around 5.246%, barely moving.
4. All Eyes Await Friday's Walsh
With fiscal measures repeatedly failing, the market's attention naturally shifts entirely to the Federal Reserve.
This Friday, Federal Reserve Chair Philip Walsh will deliver a speech at the Jackson Hole Economic Policy Symposium. This is destined to be the most-watched central bank speech of the year: since taking office in May, Walsh has provided almost no forward guidance to the market. Every word and phrase he says will be dissected.
The single answer the market most wants to know is: facing inflation persistently above the 2% target and deteriorating fiscal conditions, what exactly does the Fed plan to do?
After all, Treasury Secretary Bassett can only play with technical moves like adjusting debt maturity structures; the only entity truly capable of anchoring inflation expectations is the Federal Reserve. Before Friday, the market will likely drift sideways in apprehension.
5. Final Thoughts
Looking at the recent market movements together reveals that the market is simultaneously undergoing two "reassessments of trust."
One is towards the AI narrative: shifting from listening to stories and valuing dreams, to checking the books and demanding cash flow. The sell-off on Alibaba's placement and the panic over NVIDIA's price hike are essentially the same test paper—show the return on investment for AI expenditures. This reassessment won't end in a day or two; violent fluctuations in high-sentiment sectors will probably remain the norm.
The other is towards U.S. fiscal policy: the Treasury Department has acted twice, and the market has given a cold shoulder twice. Technical buybacks and TGA pronouncements cannot suppress yields pushed higher by inflation, deficits, and bond issuance volume. With fewer cards left in the toolbox, the market's patience wears increasingly thin.
The convergence point of these two reassessments is this Friday's Jackson Hole. One sentence from Walsh may simultaneously determine the valuation anchor for AI stocks and the interest rate anchor for Treasuries.
Risk Disclosure: This article is authored by an external contributor. The views, analysis, and forecasts expressed herein represent the author's personal stance and do not represent the views or opinions of [Platform Name]. Market data, company information, and price movements mentioned are compiled from publicly available information. [Platform Name/BIT] makes no guarantees regarding their accuracy, completeness, or timeliness. This content is for informational purposes only and does not constitute any investment advice, nor an offer or solicitation to buy or sell any financial products. Markets involve risks; investments require caution. Readers should make independent judgments and bear corresponding risks.
