[DiaryPoint | Reporter Kim Jeong-hoon] The Nasdaq Composite fell 5.5% on Nov. 5 (local time), closing at 24,315. Goldman Sachs’ equities trading desk was flooded with calls from investors. The desk said the scale of the tech-stock sell-off was about five times the move implied by the options market the previous day.
The decline in U.S. tech stocks was concentrated in semiconductor and AI infrastructure shares. A semiconductor index fell as much as 11% intraday, while the Nasdaq closed 11.9% below its October record high, putting it in correction territory. In Asian trading on Nov. 6, South Korea’s KOSPI fell 6.3% to 5,042.65, and Japan’s Nikkei 225 dropped 6.1% to 57,332.92.
Data center investment and regulatory concerns cited as drivers of the sell-off
Markets were concerned that construction of AI data centers could slow. Higher borrowing costs were compounded by concerns that gains by Democrats in the U.S. midterm elections could lead to tighter rules on data center construction. The thinking is that less data center investment could also mean weaker demand for related products and services, including AI chips and power.
Reports citing Goldman Sachs’ trading desk said the sell-off was driven more by a broad pullback in risk-taking than by bad news at any one company. Hedge funds sold some AI stocks they had bought the previous day, and buying interest faded as losses deepened during the session. That is one market interpretation of the sharp decline and should be considered separately from the earnings outlook for individual companies.
For AI holdings, look at revenue and investment plans—not just the label
If your account holds AI-related stocks, useful items to review in company results include the share of revenue from data centers, major customers’ investment plans and access to financing for capital spending. Stocks do not all fall for the same reasons or share the same path to recovery just because they are grouped under the AI theme. A 5.5% one-day drop in the Nasdaq also does not determine the fair value of any individual stock.
Leveraged ETFs are designed to multiply the daily return of an underlying index. In guidance on single-stock leveraged and inverse products, South Korea’s financial authorities have warned about steep short-term losses and the negative compounding effect that can occur over longer periods or in sideways markets. Check the product’s underlying asset, leverage multiple and daily return target. Do not assume that a return calculated by simply multiplying an index’s moves over several days will match the product’s actual return.
If you use margin financing or a loan secured by stocks, check your account’s maintenance margin ratio, the deadline for adding collateral and the terms for forced liquidation in your brokerage app. If collateral value falls below the agreed threshold, a brokerage may sell pledged shares without the investor’s consent. The threshold and timing can vary by brokerage and account agreement. South Korea’s Financial Supervisory Service also advises consumers to review collateral and liquidation terms in their agreements.
The Nov. 6 decline in Asian markets was one example of the U.S. tech sell-off’s spillover. For subsequent investment decisions, investors still need to assess each company’s results and investment plans, each product’s structure and their account’s collateral terms alongside the index’s daily moves.