Cointime

Download App
iOS & Android

Goldman Sachs Analyzes Recent AI Stock Decline: Impact from Korean Market, Leverage Products, and Month-End Rebalancing Pressure

On June 24, U.S. tech stocks experienced a rare sharp decline this year, which Goldman Sachs' trading desk believes is more akin to an orderly sell-off triggered by shocks from the Korean market and amplified by leverage and capital flows. Ariana Contessa and Mike Washington from Goldman Sachs & Co. LLC FICC & Equities wrote in the MarketFeed on June 24 that the overnight drop of approximately 10% in the Korean KOSPI index quickly weakened risk appetite, which transmitted to the U.S. trading session. By the close of trading, the S&P 500 index was down 1.44%, the Nasdaq 100 index fell 3.29%, the Russell 2000 index dropped 0.94%, and the Dow Jones Industrial Average remained nearly flat. The tech-heavy Nasdaq recorded its third-largest single-day drop in the past year, while the Philadelphia Semiconductor Index fell nearly 8%. The core of this sell-off was concentrated in the semiconductor and storage sectors. Goldman noted that there was a massive foreign capital sell-off in the Korean market overnight, with foreign investors selling over $2.5 billion worth of Korean stocks, and major stocks saw record trading volumes. SK Hynix's trading volume reached about $26 billion, marking its highest nominal trading volume in history; leveraged products related to Hynix traded approximately $3.5 billion, closing down 24%. This indicates that the declines were not solely due to fundamental concerns but were also magnified by leverage products and position adjustments. The Goldman trading desk also listed several additional pressures currently affecting the market: concerns over recent financing and potential follow-on offerings, issues related to funding for mega-cap tech stocks, individual company events, risk-averse sentiment ahead of Micron's earnings report, and the potential for U.S. pension funds to sell about $40 billion in U.S. stocks for month-end rebalancing. Goldman stated that this would be the largest month-end sell-off estimate in its model's history. However, this was not a panic-driven sell-off. Goldman indicated that the overall activity level of its trading desk was rated at 5 out of 10, with asset management firms and hedge funds showing a clear bias towards selling, particularly concentrated in tech and macro products, but the selling pressure was not overwhelming, and the overall sentiment felt 'orderly,' without excessive reactions or panic. The proportion of ETF trading rose to 36% at the open but remained well below the peak volatility levels seen in March, gradually retreating during the session. The derivatives market showed that investors were increasing their protective measures. Goldman noted that the volatility of the Nasdaq 100 was significantly stronger than that of the S&P 500, with the one-month implied volatility spread relative to the S&P 500 exceeding 10 volatility points, placing it in the 99th percentile over the past year. The trading desk continued to prefer using month-end expiring QQQ put spreads as hedging tools. Goldman concluded that the decline in tech stocks on Tuesday was not caused by a single negative factor but was the result of a combination of severe fluctuations in the Korean market, high concentration in the semiconductor and storage sectors, de-risking of leverage products, risk aversion ahead of earnings reports, and month-end capital rebalancing. Market sentiment has clearly weakened, but from the trading flow perspective, it remains an orderly risk reduction rather than a widespread panic.

Comments

All Comments

Recommended for you

  • Telegram Renames Gram Wallet to Money and Launches for All Users

    On October 9, Telegram officially renamed its previously limited-access wallet service 'Gram wallet' to 'Money' and launched it to over one billion users across the platform. 'Money' is an integrated wallet for the Gram token, supporting storage, transfers, and purchases of platform gifts and collectible usernames. Additionally, the accompanying trading platform 'Walt' offers services for over 300 assets, including tokenized stocks, precious metals, perpetual contracts, and wealth management projects. Users can make instant transfers from 'Walt' to the 'Money' wallet without incurring network fees. The official statement also cautions that investing in crypto assets carries associated risks.
  • Blockchain.com Seeks Approval for Prediction Markets and Cryptocurrency Derivatives Trading

    On October 9, the crypto asset platform Blockchain.com submitted an application to the U.S. Commodity Futures Trading Commission (CFTC) seeking to obtain licenses for a designated contract market (DCM) and a futures commission merchant (FCM) to offer event contracts (prediction markets) and cryptocurrency derivatives trading services to U.S. users.
  • US May Seize Approximately $1 Billion in Cryptocurrency Related to Iran This Week

    U.S. Treasury Secretary Bencet stated at the NPolicy Summit held by Newsmax in Washington on Thursday that we may seize $1 billion in cryptocurrency this week, adding, "We know where it is, and we are isolating them." Bencet noted that the Trump administration's approach to Iran has shifted from 'maximum pressure' to 'absolute isolation,' with measures including maritime blockades, restrictions on air travel, and the cutting off of land routes. The UAE and Oman are cooperating with the U.S., which is also working with Pakistan and Turkey to cut off all land routes in and out of Iran.
  • Zcash Development Team Plans to Introduce Quantum-Resistant Signatures in January

    The development team of the privacy cryptocurrency Zcash (ZEC) plans to introduce post-quantum signature opcodes to the network in January next year, supporting hash-based signature technology to defend against potential quantum computing attacks. This solution primarily targets the transparent (public) payment pool, where approximately 70% of ZEC is currently stored. Although the developers have set January as the target deadline, the specific network activation time has not yet been finalized. This upgrade aims to prevent attackers from using existing public keys to reverse-engineer private keys and forge payment authorizations. Additionally, the Zcash node validator Zakura has launched a wallet tool based on Private Information Retrieval (PIR), allowing users to query balances across multiple addresses without revealing the correlation between those addresses to the server. Previously, Ethereum researcher Justin Drake warned that artificial intelligence could accelerate the cracking of traditional encryption algorithms and urged cryptocurrency holders to prepare for potential security threats.
  • BTC Surpasses $83,000

    Market data shows that BTC has surpassed $83,000, currently priced at $83,017.3, with a 24-hour increase of 0.66%. The market is highly volatile, so please ensure proper risk management.
  • Central Committee and State Council: Comprehensive Implementation of 'AI+' Initiative

    On October 9, the Central Committee of the Communist Party of China and the State Council issued the 'Opinions on Developing New Quality Productive Forces.' The opinions mention the comprehensive implementation of the 'AI+' initiative. This includes promoting the transformation of traditional industries through artificial intelligence, accelerating the development of new-generation intelligent terminal applications such as smart connected new energy vehicles, AI smartphones and computers, and humanoid robots. It aims to speed up innovation in digital intelligence technologies like artificial intelligence, break through foundational theories and core technologies, and strengthen the efficient supply of computing power, algorithms, and data. The strategy involves tailored approaches based on local conditions and industry-specific policies to layout national pilot bases for AI industry applications and high-value application scenarios, vigorously promoting the application of AI across various sectors. Additionally, it emphasizes the establishment of a technology monitoring, risk warning, and emergency response system to ensure that artificial intelligence is safe, reliable, and controllable.
  • U.S. Government-Related Wallet Deposits 17,733 BTC and 750 WBTC to Coinbase Prime

    On October 9, according to monitoring by Lookonchain, wallets associated with the U.S. government have deposited 17,733 BTC (worth $1.48 billion) and 750 WBTC (worth $62 million) into Coinbase Prime over the past three days. According to tagging data from Arkham, these wallets currently hold cryptocurrency assets valued at $25.4 billion, with Bitcoin alone valued at $25.3 billion.
  • ETH Falls Below $2500

    Market data shows that ETH has fallen below $2500, currently priced at $2499.87, with a 24-hour decline of 2.55%. The market is experiencing significant volatility, so please ensure proper risk management.