Ryan Mastro

Taiwan is turning to market intervention to stop the CARNAGE: Taiwan's Weighted Index, TAIEX, surged +5.0% on Monday, ending a 7-session losing streak that had pushed the technology-heavy market into bear-market territory. $EWT $TSM The rebound followed new restrictions on short selling and the government's readiness to deploy its NT$500 billion stabilization fund. Authorities slashed the cap on intraday short-sale orders from 30% to just 3% of average daily trading volume and raised minimum short-selling margin requirements from 90% to 130%. Notably, restricting short selling can do more harm than good, reducing market liquidity, weakening price discovery and preventing investors from hedging their portfolios or expressing negative views on overvalued stocks. Short sellers also play an important role in exposing excessive valuations and market imbalances, while restrictions can distort prices and leave markets more vulnerable to sudden moves. The stabilization fund has NT$500 billion available, although previous interventions deployed substantially less capital and did not prevent further corrections in most cases. Suppressing short selling does not eliminate market risk, it only restricts one of the mechanisms through which markets price it.

The AI trade is increasingly losing ground: Goldman's AI basket has fallen -24% since May, to near its lowest level since March 2026. At the same time, the Nasdaq 100 Index is down -10% from its highs, trading near its lowest level since July. The selloff reflects growing investor concerns over the enormous cost of AI infrastructure, with surging Big Tech reliance on debt and equity financing, as well as how long it will take for these investments to generate meaningful returns. Meanwhile, the S&P 500 excluding AI stocks is up to its all-time high as defensive sectors and non-AI-related industries outperformed. The AI trade is losing momentum rapidly.