Why Are Your AI Stocks Falling Even Though Companies Aren’t Reporting Anything Bad?
Chip stocks have fallen for eight days in a row, and Wall Street is blaming the November 3 elections. But the risk the market is selling right now follows a completely different calendar than investors think.
Key points
The semiconductor stock index has suffered eight consecutive losing days, its longest losing streak since the height of the 2008 financial crisis.
TSMC reported a record quarter, yet its shares still fell as investors sold regardless of the numbers.
Wall Street expects relief after November 3, but the risk the market is selling follows a completely different calendar.
The first statewide halt to data centers in Texas was not declared by a Democrat, but by Republican Governor Greg Abbott.
The political shock is not affecting all AI stocks equally; one group of companies could even benefit from it.
Eight days of declines without a single piece of bad news from companies
The Philadelphia Semiconductor Index, which tracks the largest chipmakers, closed on Friday, October 16, with its eighth consecutive losing session. It had not seen such a long streak since October 2008, at the height of the financial crisis. It lost 15.7% over those eight days and is down roughly a fifth from its June peak. Asia looked even worse: South Korea’s Kospi plunged 7.6% on Thursday, the exchange had to temporarily halt trading, shares of SK Hynix $SKHY fell 11%, and Samsung’s dropped 9.5%. Nvidia shares $NVDA closed the week at 214.13 USD.
And yet none of the key companies announced anything bad. TSMC $TSM posted a record quarter on Thursday, but its shares still fell 2%. Investors sold regardless of the numbers.
The official explanation is inflation and interest rates. US inflation jumped to 3.7% in September, and gasoline prices rose 9.1% in a single month. The Fed raised rates for the first time since 2023 in September, and the probability of another increase at its October 27–28 meeting jumped from 22% to around 44% in a single day. More expensive money means more expensive financing for data centers, and that is poison for AI stocks.
But something new has also appeared among the reasons this time. Jefferies’ chief European economist, Mohit Kumar, wrote to clients that the bank would “take some chips off the table” ahead of the congressional elections, because a possible Democratic victory would be seen by the market as negative for the sector. For the first time, politics is being priced into AI stocks before anyone has even voted.