Welcome back to the U.S. stock analysis channel. I’m lorder. All four major indexes pulled back today, with the Russell and the Nasdaq leading the declines. On the S&P, 230 components advanced and 272 declined. Five of the eleven sectors were up, six were down. The advance-decline ratio was roughly four to six. But something unusual happened today. A media report caused the Philadelphia Semiconductor Index to completely reverse yesterday’s strong performance; all 30 components fell. We’ll go into that news in detail shortly, including some of the background. Also, Fed Chair Warsh’s speech at Jackson Hole today was much more hawkish than the market expected. Given his consistent opposition to issuing forward guidance, the market didn’t anticipate him saying much, so today was a surprise. We’ll start by covering Warsh’s remarks and the related impact on the interest-rate market, then go straight to that Wall Street Journal report. Since it involves supplier revolving credit facilities, including implications for Nvidia and the Philadelphia Semiconductor Index, I’ll give you an update today with some key levels.

Let’s first look at what Warsh said. On inflation, he noted that the twelve-month personal consumption expenditure measure is 3.7, and the six-month PCE is 4.1, both above target, and stressed that more than half of the PCE components are still running above 3 percent. Despite better-than-expected inflation data over the summer months, the underlying inflation trend has not materially improved. Unless the inflation target is restored to 2 percent, the Fed has more work to do. He again placed price stability above labor market stability, arguing that the current labor market has already met the standard for full employment.

On economic growth and conditions, Warsh said the economy is resilient and strengthening, pointing to AI-driven capital expenditure as a source of growth. He added that, given tight credit spreads, easing bank lending standards, and firm equity markets, he finds it hard to characterize financial conditions as restrictive. The implication is that the urgency to hike rates is higher than the urgency to cut, which directly dampened market sentiment.

On the industry narrative level, a Wall Street Journal report that Nvidia is pausing financing plans for some AI partners sparked concerns about the sustainability of AI demand growth, especially the portion reliant on credit expansion. This led to a broad sell-off in semiconductors, with capital flowing out of the sector and into the four mega-cap tech stocks seen as safe havens. Therefore, we are turning cautious on the semiconductor sector right now and are bullish on the four mega-cap tech names.

Today’s capital flows were very clear: the semiconductor sector sold off on heavy volume, while the four mega-cap tech stocks saw inflows on heavy volume, forming a distinct sector rotation and risk-off move. Behind this is market concern about the AI credit cycle. Everyone needs to closely monitor whether substantive reports of data-center financing difficulties emerge going forward, as that could be a key signal that the AI credit cycle is cracking.

Today’s reversal in the Philadelphia Semiconductor Index makes the technical picture delicate. The key support zone is 486 to 532; this area has strengthened somewhat due to the volume accumulated there recently. The overhead resistance zone is 550 to 580. If the index breaks below the 486 support level, it would mean investors who went long over the past month are trapped, potentially triggering larger selling and posing greater downside risk than the previous instance. While there is still structural support below, we must watch it closely.

For Nvidia, my view is to continue holding. It sits at the top of the AI ecosystem chain, has strong fundamentals, and its current valuation is not high. This pullback has not broken key support, which is roughly in the 205 to 215 area. So that’s my view on Nvidia: I continue to like its position at the top of the food chain.

As for the four mega-cap tech stocks, they hold the initiative in the AI ecosystem, able to advance or defend as conditions warrant. Earnings reports show good returns on investment, which is why they became a safe haven for capital. Under the current rotation dynamic, they are receiving clear capital support.

There are several risks to highlight today. First is monetary policy risk: Warsh’s unexpectedly hawkish remarks, emphasizing that inflation has not met the target and implying that the urgency to hike is greater than to cut, caused a shift in the market’s interest-rate policy expectations. Second is industry narrative risk, which I’ve mentioned repeatedly: the report that Nvidia is pausing some financing plans has raised market concerns about the sustainability of AI demand growth. Third is technical risk: if the Philadelphia Semiconductor Index breaks below the key 486 support level, it could trigger technical selling. Finally, there is credit cycle risk: we must be vigilant for reports of data-center financing difficulties.

We’ve reached the weekend, so I just wanted to cover this key issue for you. I imagine semiconductors are what most of you are worried about today. So, we’ll leave it here for now. See you next week.