US AI-concept stocks collectively pulled back, with the market awaiting the Fed’s stance

Waking up last night, U.S. stocks that had rallied and raised prices on the back of the AI narrative continued to see pullbacks across the board.

Whether it’s Nvidia, which recently raised server prices by more than 15% for chips equipped with AI processors, or Alibaba, which just prepared to issue new shares to raise funds for AI infrastructure, it seems that everything that raised prices or raised capital on the AI narrative is facing continuous pullbacks.

By the close of U.S. markets last night, Nvidia fell 3%, marking its seventh consecutive trading day of declines since 2022. Meanwhile, memory chip and optical communications sectors — stocks that would previously surge indiscriminately on any AI trading narrative — faced another pullback last night. SanDisk fell 6.45%, Micron fell 5.83%, and SK Hynix fell 5%.

If you want to know exactly how the market currently views the AI narrative, Alibaba’s experience this time is the best entry point.

1. Alibaba Raises HK$80 Billion for AI, Triggering a 10% Plunge in Hong Kong Stocks

Alibaba announced plans to place new shares in Hong Kong, raising a total of HK$80 billion (approximately US$10.2 billion) to be directed toward AI infrastructure — marking the company’s first share placement since its Hong Kong listing in 2019, with all chips placed on AI.

Six months ago, this would have been positive news to ignite the stock price. But the reality is that its Hong Kong-listed shares plummeted 10% on the news. At the critical moment, management rushed in to steady the ship: Group Chairman Joe Tsai and CEO Eddie Wu both stepped up to increase their holdings, collectively buying approximately HK$120 million worth of company stock, barely managing to stabilize the situation and preventing further declines in Alibaba’s U.S.-listed shares.

The boss personally spending money to support the stock just to contain the situation — that move alone says everything.

2. The Market’s Taste Has Completely Changed

What was the AI trade like in the first half of the year? No one looked at profits or cash flow — they only saw the stars and the sea, competing over who had the bigger imagination. As long as the story was sexy enough, capital was willing to grant the valuation.

Now, no one is buying that playbook anymore. The market has started checking the books: show us the revenue, show us the cash flow, and you also need to distribute dividends and buy back shares. The moment Alibaba’s HK$80 billion placement was announced, investors’ first reaction wasn’t “AI infrastructure has great potential,” but rather “here comes another dilution of my shares.”

Nvidia’s situation is the other side of the same coin. Raising server prices by more than 15% would previously have been interpreted as the strongest tailwind in the supply chain — if the upstream player dares to raise prices, it means demand is strong, and memory chips benefit accordingly. But now, this news simultaneously ignited two kinds of panic: downstream players worry about AI hardware costs spiraling out of control and pressuring investment returns; meanwhile, upstream shareholders wonder whether the company is so focused on expanding production that it has forgotten about dividends.

The same move that was bullish six months ago is bearish today. What has changed is the rulebook the market has set for the AI narrative.

3. The U.S. Treasury Tried to Rescue the Market Again, and the Market Was Unconvinced Again

Beyond the weakening AI narrative, macro pressure from U.S. Treasuries continues to weigh on the broader market.

Last night, the U.S. Treasury made another attempt to rescue the market: officials stated they would use the TGA account — the Treasury’s “checking account” at the Federal Reserve, which holds nearly a trillion dollars — to directly purchase long-term Treasuries and push yields lower.

Sounding impressive, but the market knows full well: that money can never be fully deployed into bond purchases. Government day-to-day expenses and payments on maturing debt all have to come from that account, so the amount actually available is far less dramatic. The reaction was accordingly tepid: Treasury yields dipped briefly before quickly rebounding, with the 30-year yield still hanging near the elevated level of 5.246%, barely budging.

4. All Eyes on Warsh This Friday

With fiscal measures failing repeatedly, the market’s attention has naturally turned entirely to the Federal Reserve.

This Friday, Fed Chair Warsh will deliver remarks at the Jackson Hole Economic Policy Symposium. This is set to be the most closely watched central bank speech of the year: since taking office in May, Warsh has provided almost no forward guidance to the market. What he says, how he says it — every phrase will be dissected word by word.

The market wants one answer above all: with inflation persistently above the 2% target and fiscal conditions deteriorating, what exactly does the Fed plan to do?

After all, Treasury Secretary Bessent can only play technical moves like adjusting the maturity structure of debt. The only institution with real power to anchor inflation expectations is the Fed. Until Friday, the market will likely remain range-bound in anxiety.

5. Final Thoughts

Looking at recent market action as a whole, the market is simultaneously undergoing two “trust reassessments.”

One is over the AI narrative: shifting from listening to stories and pricing in dreams to checking the books and demanding cash flow. Alibaba’s placement being sold off, Nvidia’s price hike triggering panic — these are essentially the same exam question: show us the return on AI investment. This reassessment won’t end in a day or two, and violent swings in high-momentum sectors are likely to remain the norm going forward.

The other is over U.S. fiscal policy: the Treasury has acted twice, and the market has turned cold twice. Technical buybacks and TGA talk can’t suppress yields driven up jointly by inflation, deficits, and issuance volumes. The toolkit is running low on cards, and the market’s patience is running thin.

The convergence point of these two reassessments is this Friday’s Jackson Hole. A single sentence from Warsh could simultaneously determine the valuation anchor for AI stocks and the rate anchor for U.S. Treasuries.

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