GM. This is Milk Road Stocks, the newsletter that serves the market up in bite-size pieces, crusts cut off.
Today we’re digging into the effects the midterms had on markets, and where we are headed from here…
First, a quick detour.
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IS THIS 2026’S DEEPSEEK MOMENT? 🤔
Last Thursday was the worst day for tech stocks since the COVID crash in March 2020.
The Nasdaq 100 (the 100 biggest non-financial companies on the Nasdaq) lost a record ~$2.3T in value in a single session.
And chip stocks took the brunt of it, with the Philadelphia Semiconductor Index (which tracks 30 big chipmakers) down 12.3%.
It came just two days after the midterms, and our analysts reckon two separate things broke at once:
1. The political fear.
Democrats swept Congress and several key governor races, including Texas, where the governor-elect campaigned on pausing new data center approvals. Goldman Sachs economists think short-term pauses could affect ~45% of planned U.S. data center expansion.
2. The forced selling.
Hedge funds were already pulling back after a rough October, with net leverage falling at its fastest pace since March. Melvin also pointed to reports of hedge fund trading teams shutting down, which forces them to dump positions no matter how good the companies are.
Put those two together, and the VIX (Wall Street’s fear gauge) jumped ~70% in a day, while memory stocks fell hardest of all. 👇
Our analysts aren’t too fussed about the first one.
Kyle thinks most Democrats just want data centers to pay their own way (cover their own power, give up tax breaks, be more transparent).
He points out data centers are the only growing construction sector in the U.S. right now, and doesn’t see politicians walking away from the jobs and tax money that come with them.
Vincent added that projects can move to friendlier states, a new governor can’t undo existing approvals overnight, and OpenAI has already agreed to pay the full cost of power at its future data centers.
The forced selling is the part they see as temporary...
Once the funds are done unwinding, the selling dries up - and the businesses underneath look much the same as they did last week.
Vincent summed it up with a question: “Is this the DeepSeek buying moment of 2026?”
(ICYMI: Back in January 2025, a cheap Chinese AI model called DeepSeek knocked 17% off Nvidia in a single day.)
Anyone who bought that dip at ~$118 is still up ~50% today, even after Thursday. 👇
Kyle also leaned on an old saying, “When the VIX is high, it’s time to buy,” especially with many chip stocks trading at their cheapest prices relative to earnings in decades.
Four of our analysts made 12 stock buys between Thursday and Friday:
- Kyle bought Nvidia at ~$185, calling it “buying into capitulation,” then added Galaxy on Friday.
- Vincent went for SpaceX, Bloom Energy, Palantir and Robinhood.
- Melvin picked up Credo, Bloom Energy and Nebius.
- M0xt added to SpaceX, Galaxy and TeraWulf (which has no Texas projects at all).
Melvin’s view is that hedge funds have to come back into these trades, and they won’t until prices calm down.
Retail investors helped a little, buying $100M+ of stocks in the final 10 minutes of Thursday’s session (according to Vanda Research), though they still finished the day as net sellers.
Macro isn’t helping either. Friday’s strong jobs report pushed the odds of a December rate hike to ~80%.
And this morning brought a fresh headache:
Nvidia was down ~5% before the open after its board launched an investigation into Jensen Huang’s relationship with a businesswoman U.S. intelligence agencies say is a Chinese spy.
(Yikes.)
The next test will come on Nov 17, when Nvidia is expected to report earnings.
If AI demand holds up there, Thursday could start to look a little more like January 2025...
P.S. Melvin is still up ~49% on his Micron position, even after memory took the biggest hit on Thursday.
That’s what getting in early affords you: wiggle room.
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