Global Deleveraging Triggers 'Stock Crash Feel'! Trading Volume Plummets, While You're Giving Up, Someone Is Quietly Entering This Industry

After the start of the U.S. mega earnings season, 27% of S&P 500 companies have released their Q2 2026 financial results. Among them, 86% reported EPS above expectations, surpassing the five-year average of 78% and the ten-year average of 76%. The reported earnings of these companies exceeded expectations by 39.3%, but excluding Alphabet, this figure drops sharply to 12.6%.

Strong U.S. corporate earnings have historically driven U.S. stock market gains, but investor sentiment this time is markedly different, primarily due to global deleveraging initiated in South Korea. The pressure in the U.S. is concentrated in semiconductors, while in Asia, it affects both semiconductors and AI component supply chains.

Below are the one-month performance statistics as of last Friday (7/24):

S&P 500 Index down 0.38%

Dow Jones Industrial Average down 0.45%

Nasdaq Composite down 3.27%

Philadelphia Semiconductor Index down 12.18%

Russell 200 Index down 2.67%

Including Asian markets:

KOSPI Index down 23.0%

Nikkei 225 down 5.84%

Nikkei Semiconductor Index down 22.86%

Taiwan Stock Exchange Index down 5.19%

TPEx Index down 14.58%

Since Samsung and SK Hynix together account for over 50% of South Korea's market capitalization—and at one point reached 70%—this global semiconductor correction is directly reflected in the KOSPI's performance.

Taiwan's market, however, is supported by TSMC, with the index down only 1.67% over the past month. Financial stocks also declined slightly by just 0.5%. While TSMC and financials have stabilized the overall index, small- and mid-cap stocks have pulled back significantly. This explains why the broader market fell only 5.19%, yet investors still feel like they're experiencing a stock market crash.

The market expects U.S. hyperscale data center operators (CSPs) to spend approximately $760 billion in capital expenditures this year, but only about $211 billion in depreciation will be recognized on their 2026 income statements. Moreover, capital spending is projected to grow from 2027 to 2030, leading to even greater future depreciation pressure. This will significantly reduce free cash flow, potentially turning it negative, increasing borrowing pressure, and raising market concerns about the sustainability of CSPs' capital expenditure plans. As a result, semiconductors and AI component suppliers have become the main targets of market selling.

However, CSP capital expenditure plans are based on solid fundamentals:

Alphabet's backlog orders reach $510 billion

Microsoft's backlog orders reach $630 billion

Amazon's backlog orders reach $370 billion

Oracle's backlog orders reach $638 billion

From the perspective of backlog orders, CSP capital expenditures remain within reasonable planning. Cloud service revenues are growing in tandem with capital spending, making it unlikely that these plans will be easily reversed. From an industry standpoint, investors need not be overly pessimistic.

However, global markets currently face two tightening pressures: global deleveraging triggered by South Korea, which reduces market buying power, and the U.S. 10-year Treasury yield hitting a year-to-date high last week, affecting financial asset pricing and borrowing costs. Deleveraging can prevent excessive speculation and promote market health. Investors should closely monitor the future trajectory of U.S. Treasury yields.

The 42,000-point level is a major support zone for Taiwan's stock market, suggesting limited downside risk. Following this round of global deleveraging, trading volume in Taiwan has begun to shrink, which will help consolidate market positions. Additionally, any correction in the PHLX Semiconductor Index or the Korean market presents an opportunity to test the bottom for Taiwan stocks. On July 27, Taiwan's market closed with a long lower shadow, and despite negative news from the semiconductor sector, buying interest emerged. Stocks that led the market higher are worth tracking.

This market correction has already seen many stocks fall 30% to 50%, reaching low valuations, dragging down even high-quality stocks. Our members have already begun targeting undervalued quality stocks. Which industries and stocks are worth watching? For more information, join our LINE @.

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Early Rebound Stocks: Winbond (2344-TW), Nanya Technology (2408-TW), Chung Sand (1560-TW), Sunplus Semiconductor (8028-TW), Realtek (2379-TW), Novatek (3034-TW), GlobalWafers (6488-TW)

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Source: Moore Investment Consulting – Analyst Yeh Chun-Min

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