A $57 Billion Flush

A dinner in Taipei... A salacious spy story... Nvidia fell, the market didn't... Thursday's leverage washout... A bottom, but maybe not the bottom... Buy in pieces... Marc Chaikin's 'election aftershock'...

Nvidia's CEO has some explaining to do...

The dinner at the Chinese restaurant in Taipei was crowded. It was May 2025, the week of Computex... Taiwan's biggest annual tech conference.

Reporters watched through the restaurant's glass windows, filming and taking pictures of Nvidia (NVDA) co-founder and CEO Jensen Huang. Inside, Huang put his arm around a woman in a pink dress. She kissed him on the cheek. They later left together in the same car. It wasn't his wife.

Alice Huang (no relation) was a top executive at Megaspeed, a Singapore-based cloud-computing company that has bought more than $4.8 billion worth of Nvidia chips over the past two years.

The kicker? U.S. intelligence officials reportedly believe Alice Huang was – or is – working for China's Ministry of State Security.

The New York Times reported last month that Jensen Huang may have been the target of a Chinese spy effort. On Sunday, he confirmed an extramarital relationship in an e-mail to Nvidia employees...

I was unfaithful to my wife... There is no excuse for what I did.

Nvidia's board said it's launching an "independent" investigation into whether its CEO was the target of a foreign intelligence effort. In the same statement, it said it has "confidence in Jensen and his leadership team" and has no reason to believe Huang compromised the company's secrets.

Forgive us if we're skeptical... How independent can an investigation be when it's commissioned by a board that has already declared confidence in the man being investigated? But we digress.

China's Foreign Ministry has called the spy allegations "unsubstantiated." President Donald Trump called Huang "an honorable guy." And Nvidia says Huang will keep running the company "without interruption."

Others aren't so sure... Nvidia shares fell as much as 7% this morning and closed about 4% lower.

Tech bull Dan Ives, who some of you heard at our annual Stansberry Research conference in Las Vegas in September, called it a "black eye moment" for Huang.

But it will really only matter if Huang ends up leaving, or being forced out, as CEO. Or, potentially, if he loses a chunk of Nvidia stock to his wife in the fallout and she sells.

Overall, it's not a surprise that China wants to steal U.S. AI knowledge. The market agrees.

Normally, a 4% dip in Nvidia shares would coincide with a bunch of selling in other AI and tech names... and given the company's weight in the S&P 500 Index, perhaps a down day for the U.S. benchmark. But that wasn't the case today.

The rest of the market held up...

The S&P 500, Nasdaq Composite Index, and Dow Jones Industrial Average were each up more than 2%. And chip stocks not named Nvidia led the way. Advanced Micro Devices (AMD) was up 13%.

We also saw more of the "rotation" we've been writing about in the past several weeks. The Invesco S&P 500 Equal Weight Fund (RSP) gained more than 2% and is near an all-time high. And the CBOE Volatility Index ("VIX") – the market's "fear gauge" – fell about 22%, to around 20.

Today's rebound was comprehensive. Only 80 of the S&P 500 Index components were lower, and about 85% of the small-cap Russell 2000 Index names gained.

Oil – and the White House – helped push stocks up. West Texas Intermediate crude fell 4% to around $87 a barrel, and Brent crude was down more than 5% to below $93, after Trump said he's unlikely to launch broad new attacks on Iran.

However, Secretary of State Marco Rubio said on Sunday that peace talks with Iran appear stalled. So it's probably wise to take the oil moves one headline at a time... with the backdrop of the market betting on the worst being behind us.

More on last week's shakeout...

To be clear, we still have concerns about an AI bubble and how the market is concentrated in a handful of names. The past two weeks showed just how violent an unwinding of all those bullish bets can be.

But as we said recently, in the near term, we wouldn't be surprised to see a bottom here.

Why? A slew of data says leverage has been flushed out of the system – just like we wrote in these pages one week ago. It happened on a large scale last week, with Morgan Stanley's derivatives team calling last Thursday "a day of extremes." A few pieces of evidence:

Retail investors bailed early. Retail selling in the first 90 minutes of trading on Thursday was the second largest since 2016, by Morgan Stanley's estimates.

Hedge funds pulled back hard. Net leverage among U.S. long/short hedge funds fell 5% on Thursday, the fifth-largest one-day decline since 2010. Net leverage is now in the bottom 10% of readings since then. These funds are now underweight AI stocks relative to their market weights.

Leveraged exchange-traded funds ("ETFs") had to dump stock. Funds designed to deliver 2 or 3 times the daily move of an index had their largest amount to sell in data going back to 2007, about $57 billion of U.S. stocks. Barclays and JPMorgan put out similar estimates, with roughly 90% of the selling tied to tech.

Here's why all this matters...

To keep delivering 2 or 3 times an index's daily move (this is what ETFs named "3x bull fund" or the like do), these funds rebalance near the close of every trading day. When stocks fall, the funds must sell. That selling pushes prices down further, which forces more selling.

With these funds selling... hedge funds cutting exposure to their underlying tech stocks... and trend-following funds unwinding when trades go below certain moving averages... you get a day like Thursday. That's why we saw selling accelerate throughout the middle of the day.

In other words, the selling wasn't all about fundamentals. A lot of it was about positioning – too many investors leaning the same way, and many of them heading for the exit at once.

That kind of forced selling can burn itself out. As trader Jason Shapiro, founder of Crowded Market Report and a former Stansberry Investor Hour guest, put it this morning, the market went from "the most hated bull market" to "AI companies being on discount."

But a short-term bottom isn't the bottom...

Even if we're near a short-term low, I (Corey McLaughlin) am still concerned about the air coming out of the AI boom – or bubble, depending on your view – over the longer term.

History offers a warning here if you look at the dot-com boom and bust 25 years ago.

During the dot-com bust, chip stocks suffered four separate 20% drops, each within five days. Each one was followed by a quick one-month rebound... and then more selling. All told, chip stocks fell roughly another 50% before finally bottoming.

In other words, a sharp washout can clear the decks for a bounce, but it doesn't guarantee a risk-free run higher. If the AI build-out really is slowing – because of politics, energy constraints, or borrowing costs – there could be more pain down the road.

What now?...

Well, in the short term, the calendar and history are on the bulls' side.

As we wrote last week, the stretch from the fourth quarter of a midterm year through the middle of the following year has historically been the strongest of the four-year presidential cycle.

That doesn't mean it's a straight line up from here or that there won't be more surprises.

A few potentially market-moving items to watch this week...

We get the October consumer price index ("CPI") report tomorrow morning. Tomorrow after the close, we'll also hear earnings from CoreWeave (CRWV), the "neocloud" that borrows heavily to build AI data centers. It'll be a good check-in on AI debt sentiment.

Next week, on November 17, Nvidia will report quarterly results – now with a lot more than its chip business on investors' minds. There's also the chance for Jensen Huang's earnings call to turn into an episode of Entertainment Tonight.

But no doubt leverage has been flushed out of the market in the near term. And some long-term trend indicators haven't given way.

The S&P 500 is still above its 200-day moving average ("DMA"), a simple measure of a long-term technical trend. So are the Russell 2000 and Dow, and the Nasdaq is creeping closer to its 200-DMA.

If you've been sitting on cash and waiting for a better entry into the stocks you want to own, this may be a reasonable time to start... in pieces. Put some money to work now and keep some dry powder for whatever comes next.

That way, you're not betting everything on calling an exact bottom or feeling a serious case of FOMO later, which could lead you to buy at precisely the wrong time... when bullish sentiment has reached euphoric levels.

If you want areas trades to make right now...

Our colleague Greg Diamond sees a big opportunity in this post-election setup...

Greg, editor of Ten Stock Trader and a master technical analyst, has studied all 32 midterm elections going back to 1902 and found the same pattern again and again: choppy trading into the vote, followed by a rally after the results.

He uses recurring market cycles like these to find what he calls "Doubling Windows" – short stretches when a stock or fund is primed for a big move – and trades them with options. His track record includes 28 trades that returned 100% or more in 18 days or less.

Greg believes the post-midterm rally has opened another window – one that could let folks double their money in as little as 18 days. Click here to see Greg's presentation and learn how to get his next trade alert.

Marc Chaikin's 'election aftershock' starts November 25...

Marc Chaikin, founder of our corporate affiliate Chaikin Analytics, says the midterms set off what he calls an "election aftershock" that's kicking off thanks to three converging forces.

Like Greg, Marc is tracking long-term trends, including the upcoming stretch of the presidential cycle... when the S&P 500 has gone up in 95% of instances going back to 1926.

Today, a projected $10 trillion AI spending wave and a "midterm money storm" of institutional buying will provide even more fuel.

Prepared investors could see "countless doubles and triples" over the next 12 to 14 months, Marc says.

Longtime readers know that Marc's work is rooted in his Power Gauge system that allows folks to track trends in thousands of stocks and dozens of sectors. It reveals where Wall Street is putting its money before most people notice.

The catch is that AI has scrambled the old way Wall Street groups stocks and how they're performing. So Marc has been working on a tool that sorts some 5,000 stocks into more than 100 themes based on what each company actually does.

In back testing since 2017, using this tool and a trading strategy devised from it would have averaged a 20.8% annual gain – about double the S&P 500's 9.7% over the same period. Marc explains more in his new presentation, which debuts on Wednesday.

In it, Marc will also release his annual Top 10 and Bottom 10 stocks for the new year. Click here to learn how you can prepare for the market's next stretch. The event is free – Marc just asks that you sign up in advance of Wednesday's 10 a.m. Eastern time start.

New 52-week highs (as of 11/6/26): Alpha Architect 1-3 Month Box Fund (BOXX), SharkNinja (SN), Tradeweb Markets (TW), and Veralto (VLTO).

In today's mailbag, more thoughtful feedback on the midterms, data centers, and the AI sell-off... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Regarding the future of data centers, do the people who voted to stop them realize what they have voted for? Will these principled individuals give up their smartphones, internet searches, Netflix and YouTube accounts, all of which rely on data centers? If construction stops tomorrow, who do you suppose will be screaming the loudest because of lagging streaming and increased fees? It has been reported that AI, which depends on these centers, accounts for up to 40% of the economic growth over the past few years. Those politicians who advocate a complete and immediate moratorium on construction should be asked how much unemployment and reduced growth they are willing to accept because of this.

"Years back when the government started addressing the issue of polluted air due to exhaust emissions from automobiles, their regulations were phased in over several years allowing companies to comply and markets to adjust. I suppose today's politicians would insist that we stop building cars.

"Can we not have an adult conversation on this in which all viewpoints and factors are considered and cease the knee-jerk reactions that create panic and send the markets into a tizzy?" – Subscriber Bob D.

"Many races had the wrong candidate and poor campaigning, especially Texas and S.C. The Republican vote simply did not turn out. I think one reason was failure to pass the 'Save America Act,' triggered by poor Senate leadership. Sure, gas prices caused by the Iran War played a part in turning the 'independent voter.' That coupled with poor Republican turnout was the perfect recipe for the disaster of Tuesday night. Even in Florida, a poor Republican turnout resulted in a closer race for governor than was expected, and Republicans lost the supermajority they had in the state legislature.

"Data centers were also an issue. In my own county, people are dead set against having one in our area. But I think that only slows things down, as people will begin to change attitudes when it starts affecting computer and cellphone advancements." – Subscriber David J.

"Data center growth in Texas will likely not be nearly as bad as you might think. The new blue governor, Hinojosa, is actually for Texas business growth, though I could say a lot more about her liberal objectives. But concerning data centers, she is not against them and I believe would like them to come.

"But the process needs to be controlled and have better oversight. So far they've had free rein in Texas. I've lived here for 45 years and I've seen the pushback here. Some of it is reasonable and needed, some of it is simply due to ignorance, especially of the financial benefit these centers bring to those communities. The residents are nearly cut out of the decision process. Some centers are approved by a jurisdiction, then built on its boundaries with no regard for neighborhoods next to that boundary, causing noise issues. (Yes, for some strange reason some centers can produce a lot of noise, perhaps only on a certain side; I've heard it myself.) The state doesn't have thought-out policies on electricity and water usage. Ironically, all of these problems can be solved: noise, electricity, and water. Better communication and involvement with the communities is also necessary in the solution." – Subscriber Dale H.

"In my 50-plus years of investing, I have never seen a setup like what we have today in chip stocks. 30%, 40%, 50% margins with backlogs that stretch out three years and more. They are used in computers, robots, space, manufacturing, artificial intelligence, and every thinkable industry today. And they are being punished because the people who are buying them for artificial intelligence are borrowing money to purchase them?" – Subscriber Jon R.

"Let me see if I have this right... AI and data center stocks go down because of the concern over too much capex, then when the data center buildout seems to be grinding to a halt due to the Democratic takeover of Congress, stocks drop even more. Stocks go down when bad economic data shows the economy is weak, and then they go down when the data is strong because of a fear of the Fed raising rates. Sure seems like a lot of people are looking for reasons to sell. Am I missing something? I'm sure I'm oversimplifying it, but at the surface level, it sure seems like a fickle market." – Subscriber Scott P.

Corey McLaughlin comment: I do not disagree.

"WOW! is all I can say about Friday's Digest mailbag. As a former junior college instructor, if I was to assign a thought-provoking assignment on the midterm election, with what I read in the mailbag, everyone would've received an A+..." – Subscriber Kevin S.

Corey comment: Thanks, teach. I'd say the same for today's mailbag.

All the best,

Corey McLaughlin
Baltimore, Maryland
November 9, 2026