Money Rushes Out of AI and Into Government Bonds

Risk assets weakened yesterday as oil prices rose on reports of attacks on vessels in the Strait of Hormuz, with concerns over French sovereign debt adding to the selloff. Iran said seven oil tankers had been hit by attacks or damaged by mines, while Brent crude closed 4% higher at $113.17 a barrel. Corporate bonds also flashed warning signs. HYGH fell 0.32% to $84.66, while LQDH, an investment-grade corporate bond ETF, showed signs of fading recovery momentum, warranting caution. Semiconductor stocks, including AI-related names, sold off sharply. The Philadelphia Semiconductor Index plunged 6.72% to 10,731.98, approaching its 200-day moving average. Bitcoin also fell roughly 4% as investors retreated from risk assets. Vessel damage in the Strait of Hormuz · Oil prices · HYGH · Recent LQDH performance · Semiconductor index · Market overview

In contrast to France, government bond yields in other major economies declined. The spread between French and German 10-year yields widened to around 175 basis points, while the U.S. 10-year Treasury yield plunged 16 basis points, from 5.13% the previous day to 4.97%. Cross-asset correlations suggested that bonds were reclaiming their safe-haven role, which many had considered lost. I would not immediately interpret the decline in long-term yields as a recession signal. My view is that investors are simply flocking to bonds because attractive alternatives are scarce. I expect long-term yields to fall further, although after such a sharp one-day rally, bond prices may trade with a modest upward bias in the near term. French spreads and major government bond markets · U.S. 10-year Treasury yield

The Korean stock market, where semiconductors are central, has completely lost momentum. Yesterday, the KOSPI fell 3.52% to 5,533.77, while the KOSDAQ dropped 3.62% to 764.10. Samsung Electronics declined 4.03% and SK Hynix lost 5.49%, reversing the previous day’s rebound. The overnight tech selloff could attract some dip buying, but I expect any rebound to be short-lived. I am keeping the 4,600 level in mind as a potential new low for the KOSPI, implying roughly another 17% downside from yesterday’s close. Korean market close

The broader picture is an aversion to technology stocks and extreme risk aversion. Yet the Dow edged up 0.02%, while the S&P 500 fell just 1.21%, a marked contrast to the severity of the correction felt in tech. My takeaway is that this is a stock picker’s market. I am positive on Apple, which, despite criticism of its new products, has the financial resources to wait for opportunities to acquire AI companies at lower valuations. I also favor pharmaceutical companies, health insurers, and healthcare facility operators. According to reporting on October 22, Apple was up roughly 28% year to date, setting it apart from companies facing heavy AI investment burdens. Half-jokingly, this may even be an environment in which sluggish alcohol and tobacco stocks deserve another look. Divergence across indexes · Apple’s cash flow and share performance