Navigating the AI Policy Shock: Mechanical Liquidations, Spreading Credit Risks, and Market Turmoil

Friday, November 6, 2026 | Daily briefing on AI policy risks, mechanical sell-offs, credit spreads, and market liquidations.

Summary of the Day

Our View: Yesterday’s sell-off transitioned from a news-driven reaction into a mechanical liquidation: the VIX surged 70%, South Korea and Taiwan triggered circuit breakers, and retail selling hit its highest level since the pandemic. Saxo’s assessment is spot on—positioning is amplifying the correction, and as leveraged liquidations kick in, the selling becomes self-feeding. State Street’s framework puts the core question into perspective: this is a repricing of AI policy risk rather than the AI cycle itself. The two are different, and maintaining that distinction is essential; demand is not broken, what has changed is the speed of construction and the cost of capital. Today brings two major tests: U.S. employment data and Anthropic’s IPO decision. If Anthropic delays, the sell-off will deepen by another phase. In crypto, $1 billion in liquidations occurred, but Bitcoin lost less than equities, representing positive relative performance for crypto.

• The Nasdaq 100 plunged 6.36%, marking its worst day since March 2020. The Nasdaq Composite suffered its steepest drop since the tariff day in April 2025, falling 5.5%; $3 trillion was erased from S&P 500 companies, and $2.5 trillion from the Nasdaq 100.
• The chip index crashed 12%, hitting a six-month low. AMD lost 17.26%, TSMC 10.78%, Tesla 10.77%,ASML 9.33%, and Nvidia 9.26%. The VIX spiked 69.66% to 28.18, recording its largest increase since December 2024.
• Asian markets triggered circuit breakers. South Korea’s KOSPI dropped 8% at the open, prompting a 20-hour trading halt, while Taiwan fell 8%; authorities stepped in. The South Korean Finance Minister temporarily eased leverage rules for retail investors, and Taiwan’s Ministry of Finance instructed public banks to support the market.
• CoreWeave’s credit risk premium hit a record 1,267.9 basis points. Intel’s five-year premium also hit a record at 149.7 bps; SpaceX’s premium reached an all-time high as well. Nebius dropped 15%,CoreWeave fell 10%, and both have lost half their value in a month.
• Microsoft tightened oversight on certain data center projects. According to Bloomberg, projects involving Nebius, IREN, and Nscale are under review. UBS estimates that roughly 30% of expected U.S. data center capacity growth for 2028 is at risk due to construction pauses.
• Doubt surrounds Anthropic’s IPO. According to Reuters, investors find the $1.5 trillion valuation high,leaving it uncertain whether next week’s planned roadshow will proceed; the company left its October revenue blank in its updated filing.
• Crypto saw $1 billion in liquidations, but showed relative resilience. Bitcoin fell 6.10% to $75,622, and ether lost 8.28%; however, Bitcoin’s decline remained below that of the Nasdaq 100. Zcash’s NU7 upgrade went live this morning.
• Today: U.S. October employment data (65k jobs expected); Anthropic’s IPO decision is being monitored.The Bank of England hiked rates yesterday.

Story of the Day

The Sell-Off Becomes Mechanical

On Thursday, the U.S. stock market experienced its worst session since the April 2025 tariff announcement,and the figures are extraordinary: the Nasdaq Composite dropped 5.5%, the tech-heavy Nasdaq 100 lost 6.36% for its steepest single-day decline since the March 2020 pandemic panic, the S&P 500 fell 4.36%, and the Dow retreated 3.44%. The Philadelphia Semiconductor Index crashed 12% to hit a more than six-month low, marking its worst day also since March 2020. Market capitalization wiped out totaled $3 trillion for S&P 500 companies and $2.5 trillion for the Nasdaq 100 alone. The VIX spiked 69.66% to 28.18, recording its largest surge since December 2024. More than 50 tech stocks in the S&P 1500 dropped 10% or more.

From this point, the nature of the movement changed, evolving from a news reaction into a mechanical liquidation. Charu Chanana, Head of Investment Strategy at Saxo, describes the mechanics: there is clearly an element of panic in the sell-off, and positioning is making the correction much more violent; when investors begin unwinding these positions simultaneously, the selling can become self-reinforcing, especially with leverage and forced liquidations in play. Vanda Research reported that retail selling reached its strongest level since the pandemic.

The picture was even harsher in Asia: Japan’s Nikkei dropped 6.15% to 57,320, heading toward its deepest daily loss since April 2025; South Korea’s KOSPI tumbled over 8% after the open to hit its lowest level since February 6, triggering a 20-minute circuit breaker at 09:03 AM that halted all stock and derivatives trading; Taiwan also fell 8%. During the session, Samsung and SK Hynix lost over 10% and 13%, respectively, while in Japan, Kioxia dropped 14% and SoftBank 11%, pushing SoftBank’s debt-insurance costs to a four-year high.TSMC temporarily hit its daily limit-down circuit breaker in Taiwan.

Authorities intervened, illustrating how rapidly the sell-off was progressing. South Korean Finance Minister Lee Hyoung-il held an emergency meeting with top economic officials and decided to temporarily ease leverage rules for retail investors to limit forced selling. According to multiple sources, Taiwan’s Ministry of Finance called top executives of public banks in the morning and instructed them to support the market. The interventions worked: the KOSPI pared its loss to 5.57%, and Taiwan to 4.51%. In South Korea, retail investors bought 130 billion won and institutional investors 780 billion won, offsetting 1.1 trillion won in foreign selling.Some analysts read this as a bottoming signal; Allen Huang, Vice President of the Stock Trading Department at Mega Financial Holding, noted: “We are bound to see more liquidations in margin accounts today, which likely suggests we are in the final stages of capitulation; even TSMC briefly hit its daily limit down, which typically marks the end of a decline because when TSMC is sold out, it means all stocks have been fully flushed.”

Cycle or Policy?

The correct diagnosis of this sell-off is decisive for investment decisions, and Masahiko Loo, Head of Fixed Income Strategy at State Street Investment Management, makes the clearest distinction: “This looks less like a reassessment of the AI cycle and more like a reassessment of AI policy risk.” The difference matters; there is no data showing that demand has broken—what has changed is the pace of construction and the cost of capital. Michael O’Rourke, Chief Market Strategist at JonesTrading, identified the trigger: the major election outcome, particularly Democrats winning several governorships, made the slowdown in data center construction the permanent theme taking hold. Texas Governor-elect Gina Hinojosa stated on Thursday that the state will pass legislation protecting residents regarding data centers, citing impacts on rural communities.UBS analysts estimate that roughly 30% of expected U.S. data center capacity growth for 2028 is at risk due to potential construction pauses.

The second channel is financing, where tangible damage is visible. The prime concern is whether pauses in AI construction will hit smaller companies whose fundraising capabilities are already constrained by high interest rates and tight financial conditions. Data center operator CoreWeave fell 10%, and its five-year credit default swap (CDS) premium widened to a record 1,267.9 basis points, according to S&P Global Market Intelligence data. Intel’s five-year premium also hit a record 149.7 bps, and SpaceX’s premium reached an all-time high.Nebius dropped 15%; both companies have lost at least half their value since the Nasdaq’s October 6 record.According to Bloomberg, Microsoft tightened oversight on certain data center projects acquired from Nebius,IREN, and Nscale, and Microsoft shares fell 3.58%.

Bruce Zaro, Managing Director at Granite Wealth Management, described the scale of local pushback: “There is going to be a massive backlash against data centers locating in people’s backyards and straining the electrical grid and water systems; there is a slate of data centers already approved, but there are still numerous projects awaiting permits, and getting those permitted will be a tough road.” Ted Parkhill, founder of Incline Investment Management, summarized the transition: “The market is shifting from the promise of AI to the price of AI; while it will undoubtedly be transformative in the long run, that doesn’t mean every AI stock is priced correctly right now.”

Valuation perspectives varied among other voices as well. Keith Lerner, Chief Investment Officer at Truist Advisory Services, highlighted a notable metric: tech has lagged the S&P 500 by 10.7% over the past month,marking the most extreme one-month lag since May 2002. He characterized the sell-off as uncomfortable but not abnormal, while adding that “the rubber band is stretching.” He noted an active “buyer strike” in technology.

Jun Kwang-woo, President of the Institute for Global Economics in Seoul, offered a measured take from an Asian perspective: “It’s correction time, but we feel there might be some overreaction to the midterm election results; hopefully, we stabilize soon because we understand that the pace of data center construction may slow somewhat due to concerns in many states, including Texas.” Conversely, Dong Baozhen, Chairman of Lingtong Shengtai, was more pessimistic: “The sell-off shows that AI stock prices were built on rosy illusions about the future, and that illusion is now gone; the U.S. stock market was the standard-bearer and backbone of the global AI bull run, and now that backbone is broken.”

Anthropic’s IPO Under Test

The most concrete corporate test of this sell-off will unfold today. According to four sources familiar with investor talks speaking to Reuters, potential investors in Anthropic’s IPO harbor doubts over whether the company can maintain its roadshow scheduled for next week to meet a November listing. Investors want a more attractive valuation to commit capital, and some view the recently floated $1.5 trillion valuation at the upper end of expectations. The Wall Street Journal reported Thursday evening that IPO investors are skeptical the company can achieve a $1.5 trillion valuation in a public listing. At one point in the year, the offering was expected to take place in October with a valuation target reaching up to $2 trillion.

Two details stand out. First is transparency: investors are awaiting the October revenue figure that the company left blank in its updated filing, which they will use to gauge whether growth can accelerate following a slowdown in recent months. Second is necessity: given the company’s track record of quarterly losses and massive commitments made to partners for AI infrastructure, its need to raise capital is widely accepted,meaning it may need to offer a larger discount.

The risks run in two directions. A decision to delay would heighten anxiety regarding the health of the AI ecosystem at a time when the success of state-level data center restriction initiatives has crystallized political opposition. It also poses a threat to the broader equity market, where valuations are heavily weighted toward big tech, as the perception that one of the highest-profile AI companies is struggling to raise capital weighs on the entire sector.

There are counterarguments: Rick Meckler, partner at Cherry Lane Investments, notes that these companies are not going away as part of the future, they will go public, and investors will still show intense interest, though a pullback in long-inflated private-market valuations is likely. Some analysts believe Anthropic could benefit from strong retail investor demand, much like SpaceX before it. The offering is expected by some estimates to reach $100 billion.

Market Round-Up

Equities

• Wall Street: Performance details were outlined above; individual stock movements show AMD down 17.26% to $404.40 (38.6% below its 52-week high, weekly loss of 28.60%); TSMC down 10.78% to $353.10; Tesla down 10.77% to $343.69; ASML down 9.33% to $1,356.65; Nvidia down 9.26% to $181.60; and SpaceX down 9.05% to $123.62. Nvidia’s Relative Strength Index (RSI) sits deep in oversold territory at 25.4, ASML at 27.1, and TSMC at 26.5. Large cloud companies that resisted Wednesday’s sell-off fell this time: Amazon and Alphabet lost 2.2%, Microsoft 3.58%, and Meta 3.96%.Apple proved the most resilient mega-cap, falling just 1.53% and sitting only 3.15% below its 52-week high. Data center operators Applied Digital, Cipher, and IREN dropped over 14%, while infrastructure-exposed utilities were also impacted, with GE Vernova down 7.4% and Constellation Energy down 2.5%.Today, U.S. futures are up 0.6%, while European futures are down 0.9%.
• Asia: Friday saw the aforementioned crash followed by a recovery: Nikkei closed down 6.15% at 57,320; KOSPI down 5.57% at 5,084; Taiwan down 4.51% at 39,702. The KOSPI is 43% off its June peak but still up 23% year-to-date; Taiwan’s RSI stands at an extreme oversold level of 23.7. Hong Kong’s Hang Seng fell 1.02% to 24,543, maintaining a 6.90% weekly gain as the week’s strongest major market; the Shanghai Composite was down 1.12%.
• Europe: Diverged on Thursday and remained resilient: DAX down 0.43% at 26,325 (only 1.38% below its 52-week high), CAC 40 up 0.34% at 8,205 with a 2.95% weekly gain. This divergence is explained by European indices lacking the heavy exposure to AI hardware seen in the U.S. and Asia; the STOXX 600 behaved like a hedge against AI risk this week.
• Other Regions: Brazil’s Bovespa fell 0.82% to 166,192. BIST 100 pulled back 1.26% to 11,333 but maintained a weekly gain of 1.50%; its RSI is outside oversold territory at 41.0, trading 25.5% below its 52-week high, making Turkey one of the markets least affected by the global sell-off this week.

Foreign Exchange (FX)

The Dollar Index rose 0.21% to 101.77 but retreated against safe-haven currencies. The yen strengthened 0.31% to 157.87, and the Swiss franc gained 0.35% to 0.8165. The euro fell 0.33% to 1.1198, and the pound dropped 0.40% to 1.3424; the Bank of England hiked rates yesterday, leaving the pound up 0.72% for the week with an RSI of 64.4, the strongest in its peer group.

The clearest reflection of collapsing risk appetite was in commodity currencies: the Australian dollar dropped 1.73% to 0.6883 and the New Zealand dollar fell 1.11% to 0.5562, making them the day’s weakest performers.The Canadian dollar lost 0.53% to 1.4046. USD/TRY hit a new peak at 50.09 with an RSI at an extreme overbought level of 98.6.

Safe-haven demand was prominent in fixed income: the U.S. 10-year Treasury yield dropped to 4.837%,nearing its lowest level since September 9. Japan’s 10-year yield fell as much as 9 bps to 1.795%, its lowest level since June 30. State Street’s Loo viewed this positively: “Bonds are increasingly behaving like bonds again, with yield returning as the primary return driver and restoring traditional diversification benefits.”

Commodities

• Energy: Oil rebounded following recent sharp losses: Brent rose 1.55% to $99.81, and WTI gained 1.19% to $91.60. However, the weekly picture remains heavy: Brent is down 13.12%, WTI down 10.20%, with Brent sitting 20.85% below its 52-week high (RSI 39.3). This week’s nearly 20% drop is shaping up to be the steepest weekly decline since April 2020.
• Precious Metals: Precious metals did not behave as expected during a risk-off flight and instead retreated: gold fell 1.45% to $4,053.90, silver dropped 1.55% to $51.43, palladium lost 1.68% to $1,023.50, and platinum declined 0.99% to $1,509.30. Nevertheless, during the Thursday session, gold had risen as risk markets crashed—behavior Bitcoin advocates have long expected from Bitcoin—climbing as high as $4,094 (up 0.6%) intraday. On a weekly basis, gold is up 0.56%, and all four precious metals are positive this week, meaning metals provided relative shelter from the equity sell-off.
• Industrial & Others: Copper fell 0.68% to $6.21, bringing its weekly loss to 5.69% with a weakening RSI of 37.0, beginning to lose its title as the most resilient commodity. Natural gas rose 1.26% to $2.98.

Crypto

Bitcoin fell 6.10% to $75,622 on Friday morning, completely erasing its post-election rally from Wednesday.Ether dropped 8.28% to $2,225.74; XRP lost 8.58% to $1.1967; Solana retreated 6.71% to $89.64; and Dogecoin fell 6.54% to 7.16 cents.

In derivatives, CoinGlass data shows over $1 billion in crypto derivative positions were liquidated over the 24 hours, with the bulk consisting of bullish bets. This marks the largest washout since at least October 28–29,when Bitcoin dropped from $82,000 to $76,000. Joshua Lim, Co-Head of Global Markets at FalconX,connected the two days: “Fresh selling is coming into the market as the consequences of slowing data center construction become clearer; Wednesday’s post-election relief rally was largely driven by short-covering on a well-telegraphed outcome.”

Conversely, crypto’s relative performance was positive, marking the most significant crypto observation of the day. Bitcoin’s 6.10% decline remained shallower than the Nasdaq 100’s 6.36% drop and the chip index’s 12% crash, meaning crypto held up better than many AI-tied equities. Carlos Guzman, Deputy Head of Research at GSR, explained the mechanics: “We experienced a relief rally on Wednesday driven by geopolitical optimism tied to the midterm results; today, that reversed, and the withdrawal in risk appetite was magnified by leverage.”

Jasper De Maere from Wintermute warned against reading too much into a single day’s sell-off: “Crypto held up relatively well amid the turmoil in AI stocks, and expanding adoption continues to reinforce the long-term outlook; let’s see where we stand in the short term, but the glass remains half full over the medium term.” He noted that cross-asset correlations remain high, adding that investors should watch for opportunities that will surface over time.

Flows and structural indicators are accumulating warnings:

1. U.S. spot Bitcoin ETFs recorded $430.20 million in net outflows on November 5, reversing the previous day’s $74.57 million inflow. Fidelity’s FBTC lost $199.87 million, and BlackRock’s IBIT lost $104.97 million,with six of the 12 funds experiencing outflows. Total net assets slipped to $96.65 billion, representing about 6.31% of Bitcoin’s market cap. Cumulative net inflows stand at $56.11 billion.
2. The second structural warning comes from leverage, moving in the reverse direction: Bitcoin futures open interest remained largely unchanged at $53.40 million, indicating that fresh capital is not entering the market. Open interest across many coins—such as Solana, HYPE, Dogecoin, and NEAR—also remained flat or declined while prices rose.
3. Thirdly, the Coinbase Premium indicator has been negative for weeks, meaning Bitcoin trades at a slight discount on Coinbase (U.S. regulated) compared to the offshore giant Binance. Historically, this indicator turns positive during sustainable bull trends.

Marex analysts laid out the condition: “Bitcoin reclaimed $80,000 driven by falling yields, a weak dollar, and cheap oil, with shorts funding the first leg. The second leg now needs to be carried by spot inflows and a cleaner derivatives structure.” Vikram Subburaj, CEO of Giottus, offered practical advice: “Treat this as a relief rally until stronger confirmation arrives, avoid chasing sharp moves, use dollar-cost averaging, keep position sizes modest, and monitor ETF flows and upcoming U.S. labor market data before increasing exposure.”

Second Story: Zcash’s NU7 Upgrade Goes Live

Zcash activated its NU7 upgrade early Friday morning, reducing target block times from 75 seconds to 25 seconds. The upgrade went live at block 3,543,405 mined at 02:34 UTC; by 04:59 UTC, the network had produced 225 more blocks, with an average interval of around 39 seconds as mining difficulty—which dictates how hard it is to find a block—was still adjusting to the faster tempo.

The practical impact: a merchant can see the first confirmation of a payment in an average of 25 seconds,while an exchange requiring three confirmations can cut waiting times from roughly four minutes to 75 seconds. Since each service sets its own requirements, how quickly a customer can use funds also depends on the intermediary.

Two technical changes stand out, illustrating classic trade-offs in blockchain design:

1. Speed vs. Security Trade-off: When a miner finds a block, others must receive and verify it. During this latency, another miner can produce a competing block at the tip of the network; shorter intervals leave less time to catch up. The Zakura node software, produced by network developers Valar Group and Project Tachyon, tested 25-second blocks across 80 computers spread across 11 regions with every block filled with transactions. Under these harsh conditions, 3.43% of mined blocks were orphaned (discarded),compared to 1.57% at the old 75-second tempo.
2. Capacity & Fees: NU7 limits the amount of private transaction data that can fit into each block because wallets must scan the blockchain to find incoming payments, and stuffing blocks with transactions increases the workload for every wallet. The limits reduce worst-case daily download sizes from 271 megabytes to 169 megabytes, and it is estimated that simple private payment capacity can more than double from about three transactions per second to over six. The fee structure also changed: miners now receive 40% of transaction fees, while 60% is removed from circulation and saved in a reserve designed to help fund block rewards around February 2031—a mechanism preserving the 21 million supply cap.

There is also a cost: the upgrade retired Zcash’s original 2016 privacy pool, Sprout, leaving roughly 12,224 ZEC unspendable. Co-founder Sean Bowe proposed a potential recovery mechanism, but as of Friday, no approved solution is in place.

Levels to Watch

• U.S. Employment Data (Today): 65k jobs expected, following Wednesday’s ADP reading that beat expectations at 86k. In this environment, weak data feeds growth anxieties, while strong data feeds rate worries; both are challenging for equities.
• Anthropic IPO Decision: Investors find the $1.5 trillion valuation high, and the company did not disclose October revenue. A delay would amplify concerns over the AI ecosystem’s capital-raising capacity.
• CoreWeave Credit Risk Premium (1,267.9 bps): A record level. Intel and SpaceX’s premiums are also at records; the concurrent rise of all three indicates the issue is not isolated to a single company.
• Bitcoin ($75,622 / $80,000): Current level versus the threshold that needs to be reclaimed. Marex’s condition is clear—shorts funded the first leg, and spot inflows must carry the second; ETFs saw $430 million in outflows yesterday.
• VIX (28.18): The 69.66% surge is the largest since December 2024. A rapid decline in this level indicates panic has passed, while staying elevated shows liquidations continue.
• Taiwan and South Korea RSIs (23.7 and 35.6): Taiwan is at extreme oversold levels. Mega Financial’s reading is noteworthy: TSMC hitting a circuit breaker typically marks the final phase of a decline.

Weekly Calendar

Date	Day	Event
Nov 6	Friday	U.S. October employment data (65k jobs expected); Anthropic IPO decision monitored; Zcash NU7 upgrade goes live
Nov 9	Monday	Anthropic roadshow originally expected to begin; pricing planned for the following week
Nov 11	Wednesday	MSCI announces index exclusions (Strategy and Metaplanet at risk); changes effective after close on Nov 30
Nov 30	Monday	Trump Media convertible bond buyback date; roughly $1 billion payment may be required
Dec 11	Friday	Deadline for FY 2027 spending agreement
December	—	Rate hikes expected from the Fed and Bank of Japan
Jan 3, 2027	—	New Democratic majorities take office; data center regulation and investigations on the agenda