AI rout reaches Asia, Nordic power splits

2026-11-06 · What the week changed · From the midterms to an AI rout, Asian chips and the memory chain, Nordic power splits north-south

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The post-election AI sell-off hit Taipei and Seoul while US credit held its line, and southern Swedish power cost 271 euros against nine in the north.

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From the midterms to an AI rout

On Monday the US market was grinding lower and credit was not confirming. By Friday the grind had turned into a fast sell-off in one corner: AI hardware. Democrats won the midterms, and what followed was an AI rout. On Unhedged, Robert Armstrong and Katie Martin read it as an AI infrastructure and semiconductor sell-off that could spill into a broader flight to safety.

We agree on where the stress sits and disagree on how far it has travelled. The test is credit: the US high-yield spread was 3.32% on Wednesday, up from 3.14%. That is widening, but nowhere near the level that would confirm a broad de-rating. Fear in share prices has not yet become fear in funding.

Two other arguments pull in opposite directions. Ted Oakley of Oxbow Advisors, on Kitco News, says the cycle is ending on breadth divergences and slowing growth, and holds 40–60% in cash and Treasuries. We agree with the breadth diagnosis, but breadth says fragile, not fast, and credit says not fast yet. Cem Karsan, with Noel Smith on Thoughtful Money with Adam Taggart, expects a post-election rally before a debt and liquidity crisis in early 2027. We agree debt is where the strain shows; but the week after the election brought a rout, not a rally.

Read: the US market falls further by mid-2027, and the week moved toward it. Level: high yield at 3.32%. Trigger: further widening while AI names keep falling. What would change this: the spread back under 3.14% within a week.

What the week did to our reads

US jobs, due today: our view is unemployment at 4.2% or lower, the level of the last reading. That bears on Luke Gromen's argument that US growth and tax receipts depend on stock gains. The economy is more exposed to stocks than the textbook allows, but employment is still carrying the consumer. If unemployment comes in above 4.2% while stocks fall, Gromen's case beats ours.

Norges Bank: we called a hold at 4.5% for 5 November and read it as a hold with the door open, not a turn. The "door open" half of that read is weaker: Norwegian core inflation fell to 3.1% in September from 3.5%. The standing view of 4.5% or above through June 2027 stands, with headline inflation at 3.4%. Next meeting 17 December; the view is wrong if the three-year yield falls below the 4.5% policy rate first.

Asian chips and the memory chain

Nikkei Asia reported Taiwan's steepest fall ever and a trading halt in South Korea; Yonhap reported Seoul's main index, the KOSPI, below 5,000. The chain we argue from: hyperscaler AI spending accelerates, memory and equipment margins hit generational highs, index earnings concentrate, the memory complex resets first with a double-digit weekly fall in Asian chip shares, and a broader US de-rating completes only when credit confirms. The sign that moved is the Asian chip sell-off; the one that did not is credit. We are in step four, not step five.

Finance Bureau's history traces 1997 from the baht float to regional contagion. A halt is what fast contagion looks like, but this is not 1997: today's stress runs through equity multiples on memory makers, and credit has not broken. Russell Clark argued on Monetary Matters with Jack Farley that he won't short the AI bubble because the tech giants must keep spending and equity markets will fund them. We agree capital is not the constraint, but step four needs no spending cut, only a market that stops paying peak multiples for peak memory margins. For a Nordic investor, the transmission runs through network and equipment names that trade with the semiconductor tape.

Read: level Seoul's index at 5,000. Trigger for step five: a top-four hyperscaler cutting next year's spending guidance, or high yield widening well beyond 3.32%. What would change this: Seoul back above 5,000 next week with the spread under 3.14%.

Nordic power splits north-south

Northern Sweden averaged €9/MWh this week, down from €24. Southern Sweden averaged €271, up from €199, and had almost nothing to send to eastern Denmark, priced alongside it at €274: the net flow fell to 77 MW from 595. A gap of €9 to €271 inside one country says the scarce thing in the Nordics is transmission south, not generation: the clearest evidence yet that the owner of contracted generation and grid access is the Nordic beneficiary of the power bottleneck.

Finland faces the hardest mix in the region: inflation at 2.7% in September, up from 2.4%, unemployment at 11%, and an interest rate set by a hiking ECB for a euro area running 3.8% inflation. In Sweden, as long as core inflation sits this far below target, we expect the Riksbank to hold at 1.75% on 12 November, against its own path: core inflation was 1.1%, down from 1.2%, headline 1.0%. Confirmed by a hold that keeps the path's slow climb; wrong on a quarter-point hike.

Read: if southern Sweden stays above this week's €271 into December, it feeds Swedish household inflation and weakens our view that the Riksbank's policy rate stays at or below 2% through next September. What would change this: southern prices back below the previous week's €199.

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