S&P 500’s 4.4% Slide and Nasdaq’s Technical Correction
The U.S. stock market’s artificial intelligence trade suffered a violent reversal after the midterm elections. On November 5, the S&P 500 tumbled 4.4%, the Nasdaq Composite fell 5.5%, and the Philadelphia Semiconductor Index plunged about 12%, according to TradingKey.
Nvidia, AMD, Micron Technology, and SanDisk bore the brunt of the selling. The Nasdaq entered a technical correction, and the debate over data center regulation, financing costs, and returns on AI capital expenditure intensified immediately.
By the close on November 14, the S&P 500 ETF proxy SPY stood at 749.6, down 1.25% on the day, while the Nasdaq ETF proxy QQQ was at 674.25, down 2.41%, according to Massive market data. The pressure had not fully lifted.
Morgan Stanley Says Buy the Drop as UBS Flags Excess Pessimism
Morgan Stanley and UBS called last week’s rout overdone, Reuters reported on November 9. Their argument is that tougher scrutiny of data centers need not derail demand for AI infrastructure.
Morgan Stanley’s interpretation is that some projects could move from 2028 into 2029 rather than disappear. Its analysts argued that a longer investment cycle could ease supply-demand imbalances and improve the credit outlook. The bank recommended buying the drop.
HSBC also said it was increasing equity exposure following the correction. UBS argued that investors had become too negative on political risk, credit risk, and AI spending. That is a case for reassessing expectations, rather than evidence that every company caught in the decline is fundamentally sound.
Why a 2028-to-2029 Delay Cuts Both Ways
A slower construction schedule could reduce immediate spending pressure. It could also delay revenue while borrowing costs keep accumulating. The same delay can look manageable from a long-term demand forecast and painful from a company’s cash-flow statement.
That distinction is the fault line between the bulls and the bears. Bulls see a healthy unwinding of crowded positions within an ongoing bull market, supported by strong enterprise demand and compressed valuations. Bears warn of unsustainable AI spending, deteriorating free cash flow, and rising financing pressures, projecting potential downside risks for the S&P 500 by late 2027.
Chip Stocks Face a Higher Bar Than the Broader Index
Semiconductor stocks may stabilize as price risks are digested, but meaningful recovery requires earnings downgrades and proven return on investment, TradingKey noted. The Philadelphia Semiconductor Index’s roughly 12% plunge on November 5 was far deeper than the S&P 500’s 4.4% decline, showing how concentrated the pain was in AI hardware names.
Nvidia, AMD, Micron, and SanDisk were among the AI chip stocks bearing the brunt of the selloff. For those companies, the rebound thesis depends less on macro optimism and more on whether data center orders convert into revenue on schedule.
CoreWeave Earnings and Political Backlash Test the Rebound
CoreWeave’s earnings and the political backlash will test whether the optimism is justified, according to bravenewcoin.com. The next earnings releases will show whether the distinction between scrutiny and demand destruction holds up.
Wall Street has not reached a consensus. Morgan Stanley, Yardeni Research, and Cathie Wood believe the market is primarily experiencing an unwinding of crowded positions and that the long-term bull market is not over, TradingKey reported. That view competes directly with warnings about free cash flow and financing costs.
For investors, the disagreement is consequential. A slower construction schedule could reduce immediate spending pressure but also delay revenue while borrowing costs accumulate. The same delay can look manageable from a long-term demand forecast and painful from a company’s cash-flow statement.
What the Next Earnings Print Must Prove
Watch CoreWeave’s earnings release and any guidance on data center timelines. A confirmed shift of projects from 2028 into 2029 rather than outright cancellations would support Morgan Stanley’s buy-the-drop case.
On the price side, the SPY level of 749.6 and the QQQ level of 674.25 are the reference points after the November 14 close. A sustained move back above those levels, paired with stable semiconductor earnings, would confirm the overdone thesis. A fresh leg lower in chip stocks despite stable earnings would break it.
Sources: rss_autopost