Black Tuesday for US stocks! Technology stocks big dump reveal AI bubble, black swan panic spreads globally.

On November 18, Black Tuesday, the three major U.S. stock indices experienced a big dump, with the Dow Jones plunging 1.07%, the Nasdaq dropping 1.21%, and the S&P 500 falling 0.83%. Panic over the tech stock bubble is spreading, with Amazon plummeting 4.43%, Nvidia falling 2.81%, and the Philadelphia Semiconductor Index dropping 2.31%. A Bank of America survey shows that the “AI bubble” is the biggest tail risk. The Black Swan Event erupted, and Cloudflare experienced a global outage for several hours.

Black Tuesday Reappears: The Three Major US Indices Experience a Big Dump

(Source: Yahoo Finance)

On November 18th, Eastern Time, concerns over the overvaluation of technology stocks continued to escalate, leading to a collective decline in the three major U.S. stock indices. By the close, the Dow Jones Industrial Average fell 1.07% to 46,091.74 points, the S&P 500 index dropped 0.83% to 6,617.32 points, and the Nasdaq index decreased 1.21% to 22,432.85 points. During the trading session, the declines were even more severe, with the Dow at one point dropping over 670 points and the Nasdaq approaching a 2% decline.

U.S. tech giants fell broadly, with Amazon down 4.43%, and Nvidia and Microsoft dropping 2.81% and 2.70%, respectively. The Philadelphia Semiconductor Index fell 2.31%, with the semiconductor sector suffering a big dump; Marvell Technology dropped nearly 6%, Micron Technology fell over 5%, AMD dropped over 4%, and ARM fell 3%. The index of the seven major U.S. tech stocks plunged 1.82%, with only Apple declining slightly by 0.01%.

The big dump on this Black Tuesday is not an isolated event, but part of a global market chain reaction. On that day, the Nikkei 225 index fell by 3.22%, marking the largest single-day drop since April, closing below 49000 points. The KOSPI index in South Korea dropped by 3.32%, with chip stocks leading the market decline. Major European stock indices all fell, with the German DAX index down by 1.85%, the French CAC40 index down by 1.86%, and the UK FTSE 100 index down by 1.27%.

Chinese concept stocks showed mixed results, with Pinduoduo experiencing a big dump of 7.33%. Pinduoduo's revenue growth in the third quarter slowed to 9%. Executive Director Zhao Jiazhen stated in a conference call that long-term investments will inevitably affect revenue and profits, and there is a possibility of fluctuating performance in the coming quarters. Alibaba, NetEase, and Baidu Group rose by 1.30%, 1.06%, and 2.66%, respectively.

Tech Stock Bubble Panic Spreads, AI Valuations Face Reassessment

(Source: Trading View)

Stock prices are surging and aggressive financing has led to a continuing fermentation of market concerns. Bank of America's monthly fund manager survey shows that 45% of fund managers believe that the “AI bubble” is the biggest “tail risk” in the current market, with heightened worries about excessive corporate spending (especially on AI projects). Even more astonishingly, 53% of fund managers believe that AI stocks are already in a bubble. This is the first time in 20 years that investors believe there is a phenomenon of “overinvestment” in corporations.

Daniel Pinto, Vice Chairman of JPMorgan, warned at the Bloomberg Africa Business Summit held in Johannesburg that the hot valuations in the AI industry are facing a moment of repricing. “There may be an adjustment in this field, which will also drive adjustments in other sectors, the S&P index, and the entire industry,” Pinto stated. “To justify these valuations, the productivity levels you envision will indeed be realized, but they may not materialize as quickly as the current market expects.”

Core Data of AI Bubble Concerns

Capital expenditures surge: The five major tech companies are expected to spend $371 billion this year on building data centers.

Long-term Investment Demand: McKinsey points out that by the end of this century, this infrastructure will require an investment of $5.2 trillion.

Cash Position Alert: Global fund managers' cash holdings have dropped to just 3.7%, triggering a “stock sell signal”.

Equity Allocation Too High: Investors' equity allocation has risen to the highest level since February 2025.

During the trading session, Microsoft, NVIDIA, and Anthropic announced a $30 billion collaboration agreement, but it failed to boost the stock prices of tech companies. Anthropic will expand its Claude AI model on Microsoft's Azure cloud platform, with NVIDIA committing to invest up to $10 billion and Microsoft investing up to $5 billion, raising Anthropic's valuation to about $350 billion. However, after the announcement of this deal, the stock prices of NVIDIA and Microsoft still saw a significant decline.

Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, stated: “The market narrative has indeed undergone a significant change over the past few weeks, as the market's reaction mechanism to AI has sharply shifted from rewarding the ever-increasing capital expenditure to skepticism about further investments and rapid growth in future returns. Coupled with the crowded positions of real funds and systematic accounts, it creates all the conditions for a sharp de-risking and the subsequent narrative reset.”

Black Swan Event and Cloudflare Global Outage

(Source: Cloudflare)

On the evening of November 18, a Black Swan Event broke out in the market. Global internet security company Cloudflare experienced a global outage, leading to service disruption for several hours. This outage temporarily paralyzed numerous websites, affecting entities including the U.S. Federal Energy Regulatory Commission (FERC), ChatGPT, the New Jersey Department of Transportation, and the social platform X.

A Cloudflare spokesperson stated that the company observed “a wave of abnormal traffic surge” around 6:20 AM Eastern Time, which caused errors in some of the traffic passing through its network. The root cause of the outage was an automatically generated configuration file for managing malicious/threat traffic, which exceeded the expected entry size limit, triggering a crash in the software system handling traffic for multiple Cloudflare services. The related issues were resolved within six hours, and the company claimed no evidence of any network attacks or malicious activity was found.

This Black Swan Event once again highlights the global network's reliance on “a few participants.” Alan Woodward, a professor of cybersecurity at the University of Surrey in the UK, described Cloudflare as “the 'largest company you may have never heard of.'” The company's software is used by hundreds of thousands of companies worldwide, serving as a “middle layer” between their websites and end users, helping to protect the sites from malicious traffic attacks.

This is not the first time Cloudflare has experienced service interruptions. In July 2019, a part of its network consumed excessive computing resources, causing thousands of websites, including Discord, Shopify, SoundCloud, and Coinbase, to go down globally for about 30 minutes. In June 2022, Cloudflare experienced another outage that affected traffic across its 19 data centers, lasting for about an hour and a half.

The chain reaction triggered by the Black Swan Event affected the cryptocurrency market. Bitcoin once fell below $90,000, marking the first time in nearly seven months; Ethereum briefly dropped below $3,000; XRP, Solana, Cardano, and others also followed suit. According to Coinglass data, within 24 hours, the total liquidation amount of cryptocurrency contracts across the network exceeded $1 billion, with approximately 190,000 people liquidated.

Expectations of Federal Reserve rate cuts cool down, intensifying the sell-off

Concerns are growing that the Federal Reserve will not implement a third rate cut in December, putting continued pressure on risk assets. On November 18, according to the CME FedWatch tool, the probability of a 25 basis point rate cut by the Fed in December is 42.9%, while the probability of maintaining the current rate is 57.1%. This figure is significantly lower than the rate cut expectation level of over 90% a month ago.

Investors are hoping that the Federal Reserve will boost the economy and maintain low interest rates to provide justification for higher stock valuations. The minutes from the Fed's October meeting and the September non-farm payroll report will be released on Wednesday and Thursday, respectively, becoming the focus of the market in the coming days. The U.S. Bureau of Labor Statistics will release the September employment report on November 20, with an expected increase of 55,000 jobs in total employment compared to the previous month.

Macroeconomic data shows that the labor market is losing momentum. For the week ending November 18, the number of first-time applicants for unemployment benefits in the United States was 232,000, and the number of continuing claims was 1.957 million. ADP Research data indicates that, in the four weeks ending November 1, U.S. companies averaged a reduction of about 2,500 job opportunities per week, and the labor market lost some momentum in late October.

Bank of America strategist Michael Hartnett pointed out that, given the proportion of investors' stock allocations remains at the highest level since February, if a rate cut is not realized next month, the market will “further correct.” Current positions are already “headwinds rather than tailwinds” for risk assets. The cash holding ratio in the Bank of America survey has fallen below the key threshold of 3.7%, a situation that has only occurred 20 times since 2002, and in each case, the stock market declined and government bonds performed better within one to three months.