The stock market since November has been less favorable for holders of major AI stocks. After being targeted by short sellers, Nvidia, the global AI leader, saw its stock price peak on October 29, followed by a drop of over 15%. Market rumors of a downturn have proliferated, notably fueled by Michael Burry, the financial guru who famously shorted the U.S. housing market during the 2008 subprime crisis and the inspiration behind "The Big Short." Burry has bet against Nvidia by purchasing put options, targeting the world's most valuable company. His bearish stance hinges on two key arguments: First, the AI industry faces structural risks, with Nvidia's investment in OpenAI—which then uses the funds to buy Nvidia chips—creating a potential bubble. Second, capital expenditure growth in the tech sector mirrors levels seen during the peak of the dot-com bubble, yet AI's actual returns fall far short of expectations.
Alex Karp, CEO of Palantir—another high-flying U.S. stock shorted by Burry—dismissed Burry's move as "crazy," while Nvidia CEO Jensen Huang countered that AI is still in the "early stages of long-term development." Beyond Burry's short position, Nvidia saw its shares heavily sold off in Q3, with Bridgewater Associates slashing its stake by 65.3% and SoftBank Group offloading 32.1 million shares. Amid these bearish signals, Nvidia appeared poised for a bubble burst.
However, stock prices ultimately hinge on earnings. At this critical juncture, Nvidia released its Q3 earnings report on November 20 (Beijing time), delivering stellar results. Quarterly revenue surged 62% year-over-year (YoY) to $57.01 billion, up 22% sequentially. Net profit climbed 65% YoY to $31.91 billion, with earnings per share at $1.30, beating expectations of $1.25. The data center segment, Nvidia's core business, posted $51.2 billion in revenue, up 66% YoY and 25% sequentially, accounting for 89.8% of total revenue. Huang noted that Blackwell chip sales far exceeded expectations, with cloud GPUs completely sold out. Nvidia's stock rebounded nearly 3% on the news, pushing its market cap back above $4.5 trillion.
Meanwhile, Foxconn Industrial Internet (FII), a major AI hardware player in China's A-share market, has been closely tied to Nvidia's performance. Nvidia's rebound briefly lifted FII and other AI-linked stocks like InnoLight, Zhongji Innolight, TFC Optical, and Shenghong Tech on November 20. However, most of these stocks opened high only to plunge later—FII, for instance, opened up 4.61% but closed with just a 1.35% gain.
FII, the largest by market cap among Nvidia-linked A-shares at ¥1.3 trillion, hit its all-time high of ¥83.88 on October 30, coinciding with Nvidia's peak the prior day—underscoring their tight correlation. Once a prominent "Apple supply chain" stock, FII's recent volatility has been driven almost entirely by Nvidia's AI server orders.
FII's Q3 report, released on October 30, showed robust growth: revenue rose 38.4% YoY to ¥603.93 billion, with net profit up 48.52% to ¥22.49 billion. Q3 alone saw revenue jump 42.81% YoY to ¥243.17 billion, while net profit soared 62.04% to ¥10.37 billion. Gross margin held steady at 6.76% for the first nine months, edging up to 7.00% in Q3.
FII's cloud computing, cloud service provider, and GPU AI server businesses—all tied to Nvidia—posted explosive growth: cloud revenue rose over 65% YoY in Q1-Q3 (over 75% in Q3), cloud service provider revenue surged over 150% (up 2.1x in Q3), and GPU AI server revenue skyrocketed over 300% (up 5x YoY in Q3).
Despite these stellar numbers, FII's stock peaked on the earnings day and has since tumbled over 21%. Institutional investors, who had bid up the stock by 20% ahead of the report, likely sold on the news, leaving retail investors exposed. On October 31, FII plunged nearly 8%, a move unlikely driven by散户.
From a low of ¥13.94 in early April to its October 30 peak of ¥83.88, FII soared 500% in seven months, with Q3 alone delivering a 218% surge. Retail investors piled in during this rally, with shareholder numbers swelling 44% to 476,000 in Q3. Meanwhile, Hong Kong Securities Clearing Company (HKSCC), representing foreign investors via Stock Connect, sold 122 million shares (24.96% of its stake) in Q3 after buying 8.38 million shares at lower prices in Q2.
This suggests "smart money" foreigners cashed out at highs, while retail investors bought aggressively near the top. As FII's stock corrects in November, institutions may see trimmed profits, but散户 face real losses on their本金.
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