Global stock markets are crashing — what's going on? Is the bull market over?

Overnight, US stocks sold off sharply — $NASDAQ(.IXIC)$ fell 1.88%, with tech shares taking a heavy hit. $NVIDIA(NVDA)$ dropped more than 3%, $SK hynix(SKHY)$ slid over 6%, and $ASML Holding NV(ASML)$ still tumbled nearly 4% despite beating Q3 estimates. CoreWeave, which provides cloud AI compute to customers, crashed 15%! $CoreWeave, Inc.(CRWV)$

Hit by this, South Korea’s stock market — known for its memory-chip names — plunged, with the KOSPI down nearly 8%, approaching its early-July lows and now 41% off its all-time high!

On the domestic front, A-shares opened sharply lower today, with the ChiNext Index down over 3% at one point, and the Hang Seng Tech Index dropping more than 2%! $HSTECH(HSTECH)$

The trigger for this global sell-off was last night’s US September CPI print: headline CPI rose 3.7% y/y, up from 3.4% in August and above the market consensus of 3.6%, reigniting investor fears that the Fed will keep hiking rates：

Currently, the market expects the Fed to hike by 25 bps in December, and to deliver two more 25 bp hikes in 2027：

Rising rates push up financing costs across the market and lift bond yields, meaning equities need to offer higher returns to stay attractive — putting downward pressure on valuations.

So when the Fed enters a rate-hiking cycle, equities tend to come under pressure. Take 2022 as an example: US inflation surged, and the Fed rapidly lifted rates from near zero to 5.33%. Combined with the post-pandemic rally that had left US stock valuations at historic highs, the rate hikes became the straw that broke the camel's back — the Nasdaq plunged 33% in 2022.

The Fed just hiked once in September — its first rate increase since July 2023. The odds of an October hike aren’t very high, as the Fed may wait to assess the impact of the September hike. But if US–Iran tensions stay elevated and oil prices remain high, the probability of a December hike would be almost 100%!

Combined with the fact that US stocks have rallied for four consecutive years and valuations are also at historic highs, it's not hard to see why investors are spooked by the prospect of further rate hikes.

This tech sell-off also reflects demand-side worries: a few days ago, Broadcom’s CEO flagged concerns about an AI bubble, while several big internet/tech giants voiced worries over AI security risks — all of which have made investors more cautious on tech stocks.

That said, there are no signs of a turn in AI fundamentals just yet. According to people familiar with the matter, Anthropic PBC told prospective investors that its Q3 revenue hit 16.8billionanditturnedaprofitonanadjustedbasis.Meanwhile,OpenAI′srecentannualizedrevenuehasreached50 billion and is expected to hit $70 billion by year-end!

At the model layer, revenue is concentrated mainly in OpenAI and Anthropic — China’s six leading AI companies together generate only about 10% of the combined revenue of these two US developers. Right now, OpenAI alone projects its infrastructure spending to reach $750 billion by 2030!

Also, according to South Korea’s latest export data, semiconductor exports in September rose more than 260% year-on-year, the fastest pace in recent months：

Lithography giant ASML’s results disclosed yesterday also underscore how strong AI demand remains: the company expects to raise its 2028 capacity increase to more than the previously announced 30%, and some customers are already preparing to place orders for 2029 and 2030!

Although the fundamentals of tech stocks look flawless, it’s worth noting that as the earnings base gets higher, future EPS growth will slow：

Generally speaking, when a growth stock's earnings momentum slows, it often signals that a peak is nearing and sets the stage for a valuation de-rating. What tech stocks are facing right now isn't a question of whether AI demand is sustainable — rather, it's the risk of slowing profit growth ahead, given lofty valuations and a high earnings base!

This afternoon, foundry giant TSMC will report its Q3 results. On the earnings call, management typically gives updates on AI demand — so it’s worth watching whether TSMC can bring good news and temporarily ease investors’ concerns over tech stocks.