The period of calm in US stocks has come to an end! The S&P 500 ends its record streak of 53 consecutive trading days without a drop of more than 1%, as the AI stock selloff intensifies market concerns.

Title context: The period of calm in US stocks has come to an end! The S&P 500 ends its record streak of 53 consecutive trading days without a drop of more than 1%, as the AI stock selloff intensifies market concerns. Text: As market concerns over the sustainability of the artificial intelligence (AI) investment boom intensified, combined with the latest US inflation data exceeding expectations, US stocks suffered a notable selloff on Wednesday. The S&P 500 fell 1.1%, ending a record streak of 53 consecutive trading days without a drop of 1% or more the longest period of calm since January 2020. Tech giants and semiconductor stocks were the main drags in this round of declines, as the market began to worry that the four-year-old US stock bull market could face greater challenges. Data released Wednesday by the US Bureau of Labor Statistics showed that the September Consumer Price Index (CPI) rose 0.6% month-over-month, the largest increase since April. Inflationary pressures have reignited, further strengthening market expectations that the Federal Reserve will continue raising interest rates in the future. Even if the Fed chooses to keep rates unchanged in October, it may still tighten monetary policy further down the road. Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, said that chipmakers and AI infrastructure-related stocks had previously posted large gains and are now facing pressure from weakening upward momentum, while the latest inflation data further exacerbated market concerns about Fed rate hikes. He noted that the market had originally hoped the September rate hike would be a one-off, but Wednesday's data significantly reduced the likelihood of that scenario materializing. It is worth noting that this decline broke the low-volatility pattern that had persisted in US stocks for weeks and also posed challenges for quantitative funds that had been continuously buying stocks. These funds, which rely on computer models for trading, kept increasing their equity exposure during the prolonged period of low market volatility, only to be caught off guard by the sudden reversal in market momentum. The Nasdaq 100 fell 2%, marking its largest single-day drop since July. The "Magnificent Seven" index, which tracks the performance of the seven largest US tech giants, also fell about 2%, with Apple Inc. (AAPL.US) being the only component to close higher, gaining 0.5%. Meanwhile, the closely watched semiconductor stock index fell for a sixth consecutive trading day, with cumulative losses approaching 12%, reflecting growing market concerns about AI-related stock valuations and future growth prospects. Jonathan Krinsky, Chief Technical Strategist at BTIG, said semiconductor stocks have already begun to decline as interest rates rise. If the Magnificent Seven also show a similar trend, it would further reinforce his view that US stocks could face a "Red October." The weakness in tech stocks also spread to the AI infrastructure financing market. Bond prices of AI cloud computing service provider CoreWeave (CRWV.US) fell sharply, drawing investor attention to the debt risks of related companies. According to TRACE trading data, CoreWeave's unsecured bonds maturing in 2032 fell to below 80 cents on the dollar on Wednesday. When bond prices fall below this threshold, it is typically seen by the market as an important signal that the issuer is facing financial pressure. Affected by this, CoreWeave's stock price plunged more than 15% on Wednesday. Matt Maley, Chief Market Strategist at Miller Tabak, said that previously, when the market worried about credit risk, tech stocks tended to perform well; and when tech stocks came under pressure, the credit market would ease somewhat. But on Wednesday, risks on both fronts erupted simultaneously. This means investors are not only beginning to reassess the high valuations of AI-related stocks, but also paying attention to the credit risks that could arise from large-scale financing by AI infrastructure companies. Meanwhile, small-cap stocks, which are more sensitive to interest rate changes, also suffered a notable selloff. The Russell 2000 fell 1.9% on Wednesday, down 11% cumulatively from its high set in August. It is worth noting that even as US Treasury yields retreated from their intraday highs following the inflation data release, US stocks continued to come under pressure, suggesting that investor concerns are no longer limited to rising interest rates but are gradually spreading to tech stock valuations, corporate financing, and overall market risk appetite. However, despite the notable decline on Wednesday, broad panic has not yet set in across US stocks. The S&P 500 is currently only about 1.3% away from the record high set last week. Meanwhile, the Cboe Global Markets Inc Volatility Index (VIX), which measures expected market volatility, is hovering around 17, still below the 20 threshold typically seen as a signal of significantly elevated market stress. In addition, some active fund managers who previously missed the US stock rally may become potential buyers after further market pullbacks. Data compiled by Deutsche Bank Aktiengesellschaft shows that, affected by risk factors such as elevated US Treasury yields and the Iran war, active investment managers' equity positioning is currently in the bottom third of its historical range. The gap in equity positioning between active funds and rules-based systematic funds has widened to the second-highest level since 2020. This means that compared with quantitative funds that had been continuously increasing their equity exposure, active investors still have considerable room to add positions. If US stocks pull back further, some active funds may re-enter the market, providing support. In fact, since the end of March, the total market capitalization of the S&P 500 has increased by approximately $13 trillion. After months of gains, the valuations and positioning levels of tech giants and AI-related stocks have become the focus of market attention. As US inflation reaccelerates, the possibility of further Fed rate hikes rises, and AI infrastructure financing risks begin to emerge, investors are reassessing the core factors driving this US stock bull market. However, current market volatility remains at relatively moderate levels, and active investors' equity positioning is also low, meaning whether this pullback will evolve into a deeper correction remains to be seen.