Forwarded from: Xingzhi US Stock Planet

1) Long-term investors are selling...

Although the sell-off today does not seem to indicate that anyone has fundamentally changed their investment logic, it is clear that long-term investors are engaging in "risk management" today. From the start of pre-market trading, trading desks have been handling the demand for reducing positions in the AI infrastructure sector from a large number of major asset management companies (both U.S. and international), and this selling has continued throughout the trading day.

While it is currently difficult to determine how long this selling pressure will last, the intuition is that today may have released the "highest speed" of selling (i.e., some selling is expected to occur later this week, but the scale and intensity may be significantly reduced compared to today).

2) Almost no one is buying...

Despite hearing a lot of "verbal defense" opinions about the AI infrastructure sector from some investor groups (especially hedge funds), in reality, almost no one is making actual defensive purchases during the decline.

No one likes to catch a "falling knife" (especially when most people are busy defending), and our feeling is that the real pool of funds is more inclined to add positions after a bottom rebound rather than entering too early at this moment.

3) Leveraged ETFs may have exacerbated volatility...

In recent years, the leveraged ETF sector, which has rapidly grown in asset management scale and trading volume, undoubtedly played a role in amplifying volatility today.

$Direxion Semicon Bull 3X(SOXL.US) (3x leveraged semiconductor ETF) saw a trading nominal amount of $5 billion today (corresponding to an underlying asset trading amount of about $15 billion), while $Direxion Semicon Bear 3X(SOXS.US) (3x leveraged semiconductor bear ETF) had a trading amount of $2.5 billion (corresponding to an underlying amount of about $7.5 billion), and $GraniteShares 2x Long NVDA Daily ETF(NVDL.US) (2x leveraged NVDA bull ETF) reached a trading volume of $5 billion (corresponding to an underlying amount of about $10 billion, far exceeding its historical single-day trading volume record) The short-term options for these ETFs also saw huge trading volumes today. It is reasonable to assume that these securities trading with significant leverage exacerbated today's unusual volatility.

4) Rotation pressure is evident...

As the trading day progressed, trading desks noticed more funds flowing out of the semiconductor sector and into the software sector and the liquidity of Apple ($Apple(AAPL.US)).

Additionally, from a broader perspective, there was clearly a macro fund rotation towards defensive sectors today (notably, 70% of the S&P 500 constituents recorded gains today).

5) What is the current market sentiment?

While most market participants encountered are still struggling to interpret these changes (there are still many "unknowns" regarding the DeepSeek story, and the volatility has shocked many), the overall view is that the continued growth and proliferation of AI (despite potentially lower costs, but with higher potential acceleration and penetration) still provides significant long-term benefits for the companies most impacted today, which will keep the logic of AI trading "intact."