SOX Wiped Out Into Nvidia; Hedge Funds Cut Net Leverage to a One-Year Low
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The Dow Held Up; Every SOX Name Finished Red
Monday, August 24, split the tape. The Dow gained 0.26% to 53,417. SPX fell 0.28% to 7,653. Nasdaq fell 0.76% to 25,980. The Russell dropped about 0.8%. Inside SPX, 305 stocks rose and 195 fell. Eight of eleven sectors finished higher. Breadth was not the problem. Chips were.
All 30 Philadelphia semiconductor names closed lower. SOXX dropped 2.67% to 506. NVDA closed 208.48, down 2.91%. Memory was worse: MU lost about 6%. AVGO followed. The index is still grinding near the highs. Semis already gave the bid back. A full-group wipeout into earnings is de-risking, not a routine trim.
Bonds offered a pause. The Treasury General Account is about $950 billion, close to $1 trillion. Officials said that cash can fund long-end buybacks. Size and timing are not set. The 10-year yield eased to about 4.71%. The 30-year eased to about 5.24%. The curve flattened a touch. Shorts are still trying to push the 10-year toward 5%. This is relief, not a trend.
Monday’s line was not a broad melt. SOX moved first. The rest of the tape waited. Wednesday brings NVDA after the close and PCE the same day. Friday is Warsh at Jackson Hole. Chips already handed the question over.
The Timeline Was Wrong; The Tap Is Still Mag-4 CapEx
Over the weekend Altman walked back the 2023 timeline. After GPT-4, the economy did not flip overnight. Software companies were not bought in a wave. Inertia was larger. Adoption was slower. Trillions already went into data centers, power, and chips on the premise that the real economy would shift to AI quickly. If adoption lags, monetization lags. CapEx does not shut itself off. The tap sits with the buyers.
Among the four, MSFT, AMZN, and GOOG are converting AI revenue smoothly, not successfully. META is slower. 2026 CapEx was only nudged higher. For 2027 the Street still spans about $950 billion to $1.4 trillion, with some prints at $1.7 trillion. That gap is the semiconductor earnings gap. Q3 may leak a hint. After Q4 the market has to know whether this cycle is wrapping or setting up a second season. OpenAI and Anthropic are still private. The story is unfinished. Books can stay two-way. That does not give sellers a license to break the chain early.
Semis at these levels are less defensive than the four buyers. If the upstream tightens spend, the downstream feels drought first. Hold the four: if revenue stays fast, free cash flow can heal; if it does not, they cut CapEx to protect themselves. Watch the buyer signal before arguing that chips are cheap.
Hedge Funds Cut Net Leverage to a One-Year Low in a Week
The week before, they were still buying. Last week the sign flipped. US long-short gross leverage rose 1.5 points to 205%, only the 11th percentile over one year. Net leverage fell 3 points to 48.3%, a one-year low and the largest weekly drop in five months. The fundamental long-short ratio fell to 1.617, about the 4th percentile. Gross firepower is still there. What shrank is the net long. The chase from two weeks ago was rewritten with sells.
US equities saw the fastest net selling in several sessions. Macro products were about 47% of the net sale, single names about 53%. Nine of eleven sectors were net sold. By dollars, information technology, industrials, utilities, health care, and materials led. Energy and consumer saw only small buys. IT had the largest net sale, about 1.1 standard deviations below the past year, almost entirely long liquidation rather than short adding. Every IT sleeve sold: tech ETFs, electronic equipment, instruments, hardware, storage and peripherals, IT services.
Global equities printed the second-largest weekly sale in twelve months. Asia-Pacific led. Japan, China, Korea, and Taiwan were cut. Europe and North America sold less. Over one month, US IT net exposure is still about 16.6% of US net market cap — the 25th percentile over one year and the 23rd over three. The book was not crowded. Last week looks like taking off a fresh long, not dumping a peak. Whether they keep selling this week hangs on how NVDA talks about guarantees and spend.
The Week’s Vol Is $210; Software Is Still Stuck at 107
NVDA reports after the close on August 26. The 68% band into Friday settle is about $13 around 210, five to six percent. The stock has slid about seven sessions and closed near 208. Another $13 lower tags 200, then 196. The map from late June to late August has not changed much. The print and the guide are likely fine. The question is whether Nvidia keeps guaranteeing customer finance. Five-year CDS is still 84 to 87, high versus its own history. If it carries the whole chain, the balance sheet gets tighter. If it does not, data-center buyers need another source of money. The wording has to protect both the company’s outlook and the industry’s stability.
MRVL was hit again, near 228. The 68% Friday band is about $25 around 230, wider than Nvidia. Upside toward 250. Downside toward 200. The stock is still rich. Treat the print as vol, not a breakout.
Three software names sit in the same break-or-fail zone. INTU near 370, about $31.50 either way. 390 is the first gate. 426 is the structure change. Downside sits near 340. CRWD near 191, about $17 either way, with strong support 167 to 176. Cybersecurity is already expensive. CRM near 209, about $17 either way. 227 to 230 has not cleared the right side. Downside sits near 203. IGV closed 102.45. 107 has been tested and still fails. The components cannot lift the group. MSFT has to lead. It is still coiled 469 to 487 on shrinking volume, closing on the 487 cap. Light long-term books can wait in the box. Heavy books do not need a new story.
Semis are weak. Capital wants in and will not pay up. Circular credit, vendor guarantees, and new debt keep pressure on the credit side. NVDA speaks Wednesday. The direction is not writable yet. See whether $13 around 210 is enough. If it is not, 196 comes back. SPX is still 7,653. Last week’s 745 and 729 gates remain far. SOX already left. The index has not been forced to follow.