Tech stocks crash as Blue wins

Blue has always been my favorite color. But there are many shades of blue, and each carries a different meaning. There is Xavier blue and Ateneo blue – two shades of blue that I am proud to wear. Xavier’s azure blue crest symbolizes the unity of Chinese and Filipino cultures through the Jesuit mission. Ateneo’s blue honors Our Lady and symbolizes faith, peace and commitment.

In American politics, blue represents the Democratic Party, while red represents the Republicans. Last week’s midterm elections resulted in a sweeping Blue Wave as Democrats won control of both the House and the Senate. The result shifted the balance of power in Washington and dealt a major setback to President Trump’s political agenda.

The Blue Wave triggered fears that the US AI infrastructure boom could be derailed. Last Thursday, Nov. 5, the Nasdaq 100 plunged 6.4 percent, its worst decline since the COVID crash of 2020. Semiconductor stocks fell harder with the VanEck Semiconductor ETF (SMH) tumbling 11.2 percent. The S&P 500 fell 4.4 percent, while the Dow declined 3.4 percent.

Democrats have become increasingly critical of the rapid expansion of AI data centers because of their huge electricity and water requirements, and the resulting increase in utility bills. Democratic victories in Texas, Georgia, Nevada, Ohio and Iowa have raised fears of tighter restrictions. Some incoming governors have called for moratoriums. Others favor stricter regulations or fewer tax incentives. This puts hundreds of billions of dollars in planned data center investments at risk of delays or cancellation.

In our June 8 article, “Has the tech bubble burst?” we warned that the extraordinary gains in AI stocks could be followed by equally violent corrections. Stocks were rising 20 to 30 percent on a single comment or broker upgrade. In our Oct. 5 article, “Market’s narrowing breadth,” we pointed out that only a handful of AI and semiconductor stocks were carrying the market. The Nov. 5 crash exposed the risks of excessive concentration and speculation. Stocks that had risen spectacularly are now falling just as violently. Is this another correction in the AI bull market, or are we finally witnessing the bursting of the tech bubble?

Chipmakers have been ramping up production in anticipation of continued growth in AI infrastructure spending. Memory chips, such as the high-bandwidth memory (HBM), DRAM and NAND flash, have experienced severe shortages and sharp price increases. These have driven earnings growth and stock price gains in companies like Micron, SK Hynix and Samsung. If data center projects are delayed, customers may postpone or even cancel orders. This could turn current shortages into oversupply. As a result, inventories could pile up and prices could start falling.

Even before the Blue Wave hit, hedge funds were suffering large losses. VARA plunged 33 percent in October, Engineers Gate cut most of its equity team, and Kirkoswald suffered its worst month ever. Meanwhile, Walleye Capital announced plans to return part of its investors’ capital. The Nov. 5 crash added to the pain, with tech hedge funds losing more than four percent, according to Goldman Sachs.

The magnitude of the selloff indicates that leveraged positions amplified the market decline. According to Nomura, leveraged ETFs were expected to sell approximately $47 billion worth of stocks near the Nov. 5 close to rebalance their positions. This would rank as the second-largest selling day in Nomura’s records dating back to 2006. The Direxion Semiconductor Bull 3X ETF (SOXL), which provides three times the daily exposure to the semiconductor sector, crashed 38.7 percent last Thursday.

AI’s big spenders could emerge as winners of the Blue Wave. As chipmakers and data-center developers plunged, investors started rotating into hyperscalers like Microsoft, Amazon, Meta and Alphabet. If new data center projects are restricted, their existing computing capacity becomes more valuable. A slowdown in capital spending would boost free cash flows, which have been squeezed by massive AI investments. Apple may be in a better position. Unlike its peers, it has largely stayed out of the AI infrastructure spending race, avoiding huge capital commitments. With strong earnings, solid balance sheets and established businesses, these tech giants could emerge as relative safe havens within the battered AI/tech sector.

Renewables and health care were among the biggest winners as investors anticipated greater support for clean energy, Medicaid and Obamacare. Homebuilders and retailers rallied on hopes of lower mortgage rates and greater affordability. Airlines, cruise operators and travel stocks benefited from lower oil prices and hopes for an end to the Iran war. Over the past month, consumer staples (XLP) gained about 11 percent, pharmaceuticals (PPH) 10 percent, utilities (XLU) eight percent, real estate (XLRE) eight percent, financials (XLF) six percent and materials (XLB) five percent.

Gold has rallied while oil prices have plunged since the midterm elections. The Philippine peso has also strengthened as hopes grow for an end to the Iran war. The Philippines, which has suffered heavily from rising energy costs, could become one of the biggest beneficiaries if peace returns. Cheaper oil would bring down fuel and transport costs and help ease inflation. If this happens, the BSP may have room to cut interest rates. These developments could help revive our economy and stock market, although investor confidence remains a major hurdle. After being one of the losers of the war, the Philippines could emerge as one of the winners of peace.

Philequity Management is the fund manager of the leading mutual funds in the Philippines. Visit www.philequity.net to learn more about Philequity’s managed funds or to view previous articles. For inquiries or to send feedback, please call (02) 8250-8700 or email [email protected].

abtestabtest The power of choice By Joe Zaldarriaga | 16 hours ago When I joined the power industry in 1989, the main concern was reliable supply. We went through the dark days of long blackouts... Business SM expands water conservation efforts By Maicah Rachel Eugenio | 16 hours ago SM Supermalls recently launched its second rainwater treatment facility  in Luzon at SM City Masinag in Antipolo, Rizal,... Business Philippines growth outlook dims as Nomura, BMI cut forecasts By Keisha Ta-Asan | 16 hours ago The Philippine economy is expected to grow by just 2.6 to three percent this year, well below government expectations, as... Business SM Investments earns 9% more in 9 months By Richmond Mercurio | 16 hours ago SM Investments Corp., the parent company of the Sy family’s SM Group, saw its profit rise by nine percent to P70.2 billion... Business ACEN profit soars 84% to P3.3 billion 16 hours ago ACEN Corp. kept its earnings momentum alive through the first nine months, with stronger renewable power output fueling another... Business Latest More in Business DOE revives coal auction, eyes Semirara award by Jan Indonesia sovereign fund invests in Philippines RE market ICTSI unshaken by global risks, earnings rise 20% MacroAsia venturing into energy business abtest Phinma sustains growth momentum By Richmond Mercurio | 16 hours ago Phinma Corp., the diversified conglomerate of the Del Rosario Group, sustained its growth momentum in the first nine months,... Business FNI consolidates nickel subsidiaries By Adrian Kenneth Halili | 16 hours ago Global Ferronickel Holdings Inc.  is consolidating its nickel mining subsidiaries after its board approved the proposed... Business Avoiding a regress in ProGRESS By Bienvenido Oplas Jr. | 16 hours ago Philippine GDP growth deceleration has continued from 5.7 percent in 2024 to 4.4 percent in 2025, 2.8 percent in the first... Business Alternergy lines up P26 billion RE projects By Brix Lelis | 16 hours ago Alternergy Holdings Corp. is investing around P26 billion to develop 320 megawatts of renewable energy projects as it seeks... Business Filinvest Group to shut down in-house construction arm By Richmond Mercurio | 16 hours ago The Filinvest Group of the Gotianun family is shutting down its in-house construction company, Dreambuilders Pro Inc., by year-end. Business Recommended Kinsay mas kahadlokan? November 12, 2026 - 12:00am Nireklamo si Bise Presidente Sara nga nasakitan ang mga trabahante sa Office of the Vice President . Kada banat sa administrasyon ni Presidente Ferdinand Marcos Jr. batok niya. Nahadlok. Naglibog. Nanghilak. Mao...r BusinessSARA DUTERTE Misakay sa China November 12, 2026 - 12:00am Daghan ang mialma sa pamahayag ni Vice President Sara Duterte atubangan sa mga Overseas Filipino Workers (OFW) didto sa Hong Kong tungod kay giisip ni sa uban nga “unpatriotic”. BusinessCHINA Apiking depensa ni Sara November 9, 2026 - 12:00am Hinaut nga dili tinuod ang pagduda sa House panel of prosecutors nga wala kaandam og depensa si Bise Presidente Sara Duterte sa pag-abot sa iyang turno karong buntag sa pagpadayon sa impeachment trial sa Senado...r BusinessSARA DUTERTE Wa nay kapilian November 7, 2026 - 12:00am Sa kataposan, sa gusto niya o sa dili, bisan sa ka-feeling hawod, kay kumbinsido nga ang kapin sa 32 milyones ka boto nga nakuha niya niadtong 2022 maoy kinakusgang panagang sa bisan unsang pagsuway pagpalagpot niya...r BusinessSARA DUTERTE next Recommended Kinsay mas kahadlokan? Nireklamo si Bise Presidente Sara nga nasakitan ang mga trabahante sa Office of the Vice President . Kada banat sa administrasyon ni Presidente Ferdinand Marcos Jr. batok niya. Nahadlok. Naglibog. Nanghilak. Mao nga nipatuman sila og mental health program. 16 hours ago SARA DUTERTE Misakay sa China Daghan ang mialma sa pamahayag ni Vice President Sara Duterte atubangan sa mga Overseas Filipino Workers (OFW) didto sa Hong Kong tungod kay giisip ni sa uban nga “unpatriotic”. 16 hours ago CHINA Apiking depensa ni Sara Hinaut nga dili tinuod ang pagduda sa House panel of prosecutors nga wala kaandam og depensa si Bise Presidente Sara Duterte sa pag-abot sa iyang turno karong buntag sa pagpadayon sa impeachment trial sa Senado. 3 days ago SARA DUTERTE Wa nay kapilian Sa kataposan, sa gusto niya o sa dili, bisan sa ka-feeling hawod, kay kumbinsido nga ang kapin sa 32 milyones ka boto nga nakuha niya niadtong 2022 maoy kinakusgang panagang sa bisan unsang pagsuway pagpalagpot niya sa puwesto, mapugos na si Bise Presidente Sara Duterte pagtubag sa mga pasangil batok niya. 5 days ago SARA DUTERTE OK Are you sure you want to log out? Yes No X Login Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!