Behind the overnight evaporation of over trillions of dollars in market value in the US stock market

On Friday local time, the US stock market experienced a rare sell-off, with the Nasdaq index plummeting by over 4%, the Philadelphia Semiconductor Index plummeting by over 10% in a single day, and the nine trillion dollar technology giants evaporating over $1.1 trillion in market value overnight. AI chip leaders such as Nvidia, Micron, and AMD led the decline, while gold and digital currencies weakened simultaneously, and global asset classes fell into a collective correction. The sudden evaporation of trillions of wealth is not a sudden black swan, but a concentrated outbreak of the triple contradiction of monetary policy turn, AI valuation foam burst, and market capital structure change, which is not only an emotional catharsis under the impact of short-term data, but also a concentrated exposure of many years of structural hidden dangers in US stocks.

The unexpected reversal of interest rate cuts in non farm payroll data is the most direct trigger for this round of sharp decline. The US Department of Labor announced that there were 172000 new non farm payroll jobs added in May, almost twice the market expectation of 85000. Coupled with the upward revision of employment data in the previous two months, the resilience of the US labor market far exceeded market expectations, completely shattering the previously hyped interest rate cut narrative in the capital market. In the past few months, mainstream Wall Street funds have anchored the Federal Reserve's 2-3 interest rate cuts this year, and have aggressively increased their holdings in high growth technology stocks with expectations of easing; After the data was released, the interest rate futures of Zhishang Exchange were quickly priced, and the probability of the Federal Reserve resuming interest rate hikes in December soared to 67%. The yield of 10-year US Treasury bonds rose by 12 basis points in a single day, stabilizing at the 4.3% mark, and the global asset pricing anchor suddenly tightened. Growth oriented technology stocks are priced based on forward earnings valuation, and high interest rates directly raise the discounted cost of cash flow. The overvalued sector is the first to experience valuation reassessment, and funds are beginning to concentrate and escape.

The false high valuation of AI track and the accumulation of foam are the internal reasons for the collapse of the trillion market value. In the past nine weeks, the AI computing power and semiconductor sectors of the US stock market have gone out of the unilateral boom, and massive funds have poured into the chip leader. The AI related stock market values account for nearly 40% of the total market value of the US stock market. The valuation structure mirrors the abnormal pattern on the eve of the Internet foam in 2000. In this round of market trend, many chip companies' stock prices have risen far beyond their performance growth rate, and the market has overdrawn the dividends of AI landing in the next few years. Investors assume that the AI market can continue to rise without monetary policy. Broadcom's financial report has become a key breakthrough, with impressive growth in enterprise AI revenue. However, it has not raised its annual performance guidance, breaking the market's one-sided optimistic expectations and triggering a stampede sale in the chip sector. This has spread from Broadcom to the entire industry chain, with Micron falling 13% and AMD falling nearly 11%. High priced crowded chips are concentrated and cashed out, directly driving the trillion dollar market value to shrink.

The massive IPO draws blood and reallocates funds, further amplifying short-term market volatility. As the end of the month approaches, SpaceX launches its largest IPO in history, raising over $75 billion. Institutional investors passively sell off their holdings to cash in and withdraw massive liquidity from high tech stocks, compounded by a shortage of funds within the theater. At the same time, the panic index VIX surged 40% in a single day, and risk aversion quickly spread. Funds shifted from high volatility growth tracks to undervalued defense sectors such as public utilities and essential consumption, highlighting the characteristics of market stock games and further suppressing the recovery momentum of the technology sector. Funds have shifted from extreme clustering to collective withdrawal, exacerbating the short-term supply-demand imbalance and causing the index to decline, resulting in the evaporation of trillion dollar market value in a single day.

Under the surface of a sharp decline, there are deep-seated concerns about the long-term structural imbalance of the US stock market. In recent years, the US stock market has overly relied on AI themes and top technology stocks to drive the index, resulting in a high concentration of individual stocks. The rise and fall of a few giants have influenced the overall trend of the market, and the market's ability to resist risks continues to weaken. The US economy presents a differentiated pattern of "hot employment and stubborn inflation", with a slower pace of price decline than expected by the Federal Reserve. Monetary policy is caught in a dilemma, with frequent swings between loose and tight expectations, which continue to disrupt the pricing logic of the capital market. Overreliance on speculative themes rather than real economic profits to support the rise is bound to be difficult to sustain in the long run. Once the liquidity environment tightens, high valuations lack fundamental support, and a significant correction becomes inevitable.

The trillion dollar market value evaporation this time has sounded the alarm for the global capital market. Capital is always constrained by the gravity of interest rates, and bull markets that are detached from fundamentals and monetary environments will eventually return to rationality. A short-term correction will not completely end the long-term development of the AI industry, but the market will bid farewell to blind speculation and return to performance oriented rational pricing. Looking at the world, the volatility of US stocks will be transmitted outward along the cross-border capital, bulk commodities and foreign trade chain. Capital markets in various countries need to be alert to the chain shock brought by the contraction of external liquidity, rationally review asset valuations, and prevent the risk of asset foam caused by the theme.