Quad-Bearish News Bombshell: Central Bank Interest Rate Decision Looms, NVIDIA CDS Skyrockets, Double Happiness in China, Semiconductor Sector Faces Concentrated Sell-off

BlockBeats News, July 28th: Since last night, a series of global semiconductor trade-related "major negative news" has emerged. The U.S. semiconductor sector has come under pressure, with NVIDIA falling by about 5%, the Philadelphia Semiconductor Index dropping by 2.23%, and the Nasdaq recording a slight decline.

During the Asian trading session, AI hardware assets in South Korea, Japan, and Hong Kong continued to decline. The South Korean KOSPI Index fell by over 10% intraday and triggered circuit breakers twice, with heavyweights SK Hynix and Samsung Electronics experiencing sharp declines. Leveraged products in the Hong Kong market saw further intensified losses, with the Southern twice-leveraged SK Hynix ETF and twice-leveraged Samsung Electronics ETF both plunging by over 20%.

The "major negative news" that triggered this round of selling has four main clues: first, concerns over the progress of China's semiconductor localization have raised competition worries; second, NVIDIA's AI infrastructure-related transactions have reignited concerns about "circular financing"; third, the semiconductor sector had seen excessive gains previously, prompting profit-taking at high levels; fourth, the open-sourcing of Kimi K3 has once again cast doubt on the high spending of U.S. and South Korean tech giants.

On the news front, according to The Information, a Chinese state-supported company has started mass-producing domestically developed immersion DUV lithography equipment, with plans to produce around 5 units in 2026 and expand to around 20 units in 2027. Although this scale is significantly smaller than ASML, which delivered 131 sets of immersion DUV systems last year, the domestic DUV entry into mass production is seen by the market as a significant breakthrough in China's chip supply chain localization. As a result, ASML plummeted by 5.80% on Monday, with U.S. storage and equipment chains weakening concurrently, as SanDisk fell by 11.02% and Western Digital fell by 4.21%.

However, several institutions believe that the market's reaction may be overly exaggerated. JPMorgan Chase pointed out that Chinese-made immersion DUV equipment is still in the early stages of small-scale production, and its performance, reliability, and large-scale production capacity are yet to be verified, making it a long way from truly replacing ASML equipment. Samsung Securities also believes that it will be difficult for Chinese AI chips and server DRAM to enter the U.S. data center ecosystem in the short term, limiting the actual impact on the current AI semiconductor cycle. Citrini analyst Jukan stated that the substantial incremental details revealed in the related reports are limited, and the sell-off reaction of ASML and other semiconductor equipment stocks is excessive.

Another source of pressure comes from the Chinese storage industry. As Changxin Technology surged by 466% on its first day of trading, becoming the largest A-share listed company by market value in China, the market interpreted this as a potential acceleration of China's self-sufficiency in the storage industry. For global storage leaders such as SK Hynix, Samsung Electronics, SanDisk, and Western Digital, the presence of better-capitalized Chinese competitors implies that the long-term supply landscape could undergo changes, prompting a reevaluation of existing bearish narratives in today's trading.

Meanwhile, concerns over credit risk stemming from NVIDIA's $750 billion AI infrastructure partnership are spreading from the bond market to the stock market. Bloomberg reported that NVIDIA is said to be discussing providing up to $250 billion in guarantees to help OpenAI lease computing power for its U.S. data center project; the company also disclosed that its collaboration with South Korea's SK Group, the parent company of SK Hynix, exceeds $500 billion. ICE Data Services data shows that NVIDIA's 5-year CDS surged by around 14 basis points at one point, peaking at around 82 basis points per year, marking the largest intraday increase since the active trading of the relevant contracts.

CDS can be simply understood as "debt default insurance." When CDS prices rise, it usually means the market believes the related company's debt risk or potential payment pressure is increasing. For NVIDIA, the credit market is reassessing the balance sheet pressure that could result from its large-scale guarantees, customer financing, and AI infrastructure partnerships. Hideyuki Ishiguro, Chief Strategist at Nomura Asset Management, stated that the rising credit risk for NVIDIA is seen by investors as a negative signal.

Pressure at the AI model level is also intensifying. The Dark Side of the Moon's Kimi K3 released its model weights on July 27th, widely seen in the market as another significant milestone in China's open-source AI model development. Public information shows that Kimi K3 is a 28 trillion-parameter-level model that supports long context, multimodality, and intelligent agent capabilities, emphasizing the ability to approach cutting-edge models at a lower cost. Following DeepSeek, Chinese high-performance open-source models have once again caught the attention of global investors, prompting a reevaluation of the valuation basis of U.S. closed-source models, cloud providers, and the AI hardware chain.

For the U.S. stock market, the pressure brought by Kimi is not directly from the single model itself, but from the reinforcement of the narrative of "low-cost, high-performance AI." If model improvement no longer relies solely on larger GPU clusters and higher capital expenditure, investors will naturally question whether the marginal return on expanding data centers by companies like Microsoft, Meta, Amazon, and OpenAI will decline, and whether the high valuations enjoyed by NVIDIA, Broadcom, AMD, storage, and equipment chains can be sustained. In other words, Kimi's open-source release has deepened the market's concern about the efficiency of AI capital expenditure, and has placed the trading logic of "the more computational power, the better" under repricing.

More importantly, the market's focus on AI trades has shifted. Previously, the surge in tech stocks was mainly driven by "high computational demand"; now, with the emergence of low-cost open-source models like Kimi, NVIDIA's customer financing arrangements, and massive data center capital expenditure coinciding, investors are beginning to question whether AI investments can indeed translate into sufficient cash flow and how much of the customer purchase demand relies on supplier financing support.

There is also pressure at the macro level. This week, both the Federal Reserve and the Bank of Japan will announce their interest rate decisions, and the market is concerned about a "hawkish" stance from both the US and Japan. The Federal Reserve will meet on July 28th and 29th, with the current federal funds target range at 3.50%-3.75%. While most traders still expect a steady outcome, the market has priced in about a one-third probability of a surprise rate hike. Goldman Sachs has stated that the outcome of this Federal Reserve meeting is "extremely uncertain." Against the backdrop of AI capital expenditure, oil prices, and tariffs that could still drive up inflation, if the Federal Reserve sends a stronger signal, the valuation pressure on high-valuation tech and semiconductor stocks will further increase.

On the Bank of Japan side, the meeting on July 30th and 31st is expected to keep the policy rate unchanged at 1.00%, but the market is more focused on whether the Bank of Japan will signal future rate hikes. Reuters has reported that the Bank of Japan may hold rates steady this week while retaining room for further rate hikes to address pressure from a weak yen, energy prices, and inflation expectations. The Bank of Japan had previously raised rates by 25 basis points to 1.00% in June, the highest level since 1995. If the Bank of Japan continues to take a hawkish stance, the stability of the yen carry trade will also be tested, and global risk assets may face additional deleveraging pressure.