To The Moon

I. Performance of Global Equity Indices (in US Dollar)

Source: Bloomberg, Tiger Brokers

Key Highlights

◼ Last week, U.S. equities weakened amid prolonged government shutdown risks and renewed debates over AI capital spending. The Nasdaq fell nearly 3%, marking its largest weekly drop since April. Although the government shutdown set a new record for duration, the crisis has since eased, and related macro risks have largely subsided. Meanwhile, tech giants such as Meta and Oracle issued over USD 75 billion in new debt within two months to expand AI infrastructure, triggering volatility in credit markets. Nevertheless, we believe these short-term concerns will not derail the broader AI trend — the key drivers for U.S. equities in the medium term remain earnings delivery and the pace of capital expenditure.

◼The Greater China market edged higher last week, with both the Hang Seng Index and the Shanghai Composite posting modest gains, though sector rotation remained evident. Improving macro data continued to support stabilization: October CPI returned to positive territory, and PPI declines narrowed, boosting cyclical sectors that benefit from demand recovery. Internet and tech names came under pressure due to earnings concerns and export restrictions, yet China’s AI capabilities remain globally competitive — notably, the Kimi K2 Thinking model outperformed GPT-5 in multiple benchmarks. Looking ahead, Q3 earnings will be crucial, with sustained AI business growth likely to be the key factor in restoring investor confidence.

◼ Key focuses this week include earnings from Tencent, JD.com, and SMIC, as well as key macro data including U.S. inflation (TBD) and China’s retail sales and industrial production.

II. Key Market Themes

U.S. Equities: Government Shutdown Nears an End — Short-Term Pullback Doesn’t Derail the “Goldilocks” Narrative

Last week, U.S. equities weakened amid multiple headwinds including the prolonged government shutdown, tightening liquidity, and renewed concerns over AI capital spending. The Nasdaq fell roughly 3% for the week, marking its largest weekly drop since April. At the macro level, uncertainty largely stemmed from the federal shutdown. As of last Friday, the U.S. government had been closed for over 40 days — the longest in history. Around 800,000 federal employees were either furloughed or working without pay, reducing air traffic capacity and disrupting travel and consumption. Meanwhile, delays in key labor and inflation data releases further blurred visibility into the economic and policy outlook.

However, this crisis appears to be nearing resolution. As of November 10 (Beijing time), Congress passed a continuing resolution (CR) extending government funding through late January. Republicans agreed to allow Democrats to decide on a December vote for extending ACA subsidies and to reverse all unpaid furloughs with full compensation. Based on historical precedent, the current shutdown is effectively ending, with fiscal spending and data reporting expected to normalize soon. As a result, near-term systemic risk is easing, and market attention is shifting back toward macro indicators.

Meanwhile, debate over the sustainability of AI-related capital expenditure dominated investor sentiment. OpenAI’s CFO sparked controversy after suggesting “government backing” for AI investment, later clarifying that the comment referred to expanding tax credits to cover AI servers, data centers, and grid equipment — not seeking direct debt guarantees. In parallel, Oracle and Meta have significantly increased their debt issuance to fund AI infrastructure. According to Bank of America, AI-driven tech giants issued roughly $75 billion in new bonds across September and October alone — more than double last year’s total. The message is clear: the AI race has evolved from burning profits and revenues to burning leverage. Unsurprisingly, the credit market reacted poorly — CDS spreads for Oracle and CoreWeave spiked notably last week.

Source: BofA Global Research

Since late 2022, the ongoing AI bull market has been driven mainly by a handful of mega-cap tech firms. The equal-weighted S&P 500 has significantly underperformed its market-cap-weighted counterpart, underscoring that “high-profitability, high-valuation” AI leaders remain the anchor of this cycle. Current skepticism reflects shifting risk sentiment rather than a structural break in the AI narrative. The competition and innovation within AI will not pause — capital expenditure and earnings delivery remain the key drivers of U.S. equities over the medium term.

Greater China: Growing Divergence as Cyclical Recovery and Tech Breakthroughs Resonate

In contrast to the sharp volatility in U.S. equities, Greater China markets continued a mild upward trend last week, with both the Hang Seng Index and the Shanghai Composite posting gains of varying degrees, though sector divergence has become increasingly evident. As the year-end approaches, institutional investors tend to lock in profits and adjust portfolio structures, leading to a market characterized by “stable indices and sector rotation.” Historically, sectors that outperform in the first three quarters often struggle to maintain momentum in the fourth, suggesting current rotations lean more toward defense and rebalancing. Following the one-year trade truce between China and the U.S., both sides have shifted policy focus back to domestic economic recovery. Combined with a rebound in global manufacturing and stabilizing inflation expectations, macro risks have eased significantly, providing medium-term support for Greater China markets.

At the same time, improving macro data has reinforced expectations of economic stabilization. According to the National Bureau of Statistics, China’s CPI turned positive in October, rising 0.2% year-on-year and ending three consecutive months of decline, while PPI also turned positive month-on-month, with its annual contraction narrowing to -2.1%, the smallest in three months. These indicators suggest that demand is gradually recovering and deflationary concerns are easing. Against this backdrop, cyclical sectors have taken the lead, with non-ferrous metals and chemicals attracting capital inflows as valuation recovery is being re-priced.

Source: Wind

Meanwhile, the internet and technology sectors remained under pressure. On one hand, institutional investors generally believe that leading internet companies such as Alibaba, Meituan, and JD.com continue to be weighed down by losses in instant retail businesses, which may lead to a second consecutive quarter of profit decline—prompting cautious sentiment. On the other hand, the U.S. government further tightened export approvals for Nvidia’s B-series high-end GPUs, adding uncertainty to China’s computing power supply. Nevertheless, from an industry perspective, China’s AI development has not fallen behind; instead, it has demonstrated sustained breakthroughs. The newly released Kimi K2 Thinking model outperformed top overseas models including GPT-5 in several professional benchmarks, natively equipped with the capability to “think while using tools.” Looking ahead, Q3 earnings reports from major tech firms in the next two weeks will be key to watch. If AI-related capital expenditures and cloud revenues maintain strong growth, coupled with low valuations and improving earnings expectations, the technology sector may still see upside revisions next year.

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