A significant shift is underway in U.S. stock market dynamics. Amazon.com Inc. has experienced nine consecutive days of decline. After entering a technical bear market on Thursday, becoming the second member of the Magnificent Seven (Mag7) to do so, its shares continued to fall on Friday. Microsoft Corp. was the first Mag7 constituent to fall into bear market territory. According to statistics, the combined market capitalization of the Mag7 has evaporated approximately $1.51 trillion (around RMB 10.4 trillion) since the start of the year.

Concurrently, reports indicate that UBS Group AG and Goldman Sachs Group Inc. recently submitted their Q4 portfolio reports (Form 13F) to the U.S. Securities and Exchange Commission (SEC), covering the period up to December 31, 2025. The filings reveal that both institutions significantly reduced their holdings in several major U.S. tech giants. Notably, UBS slashed its position in NVIDIA Corp. by 10.042 million shares, a reduction of 11.47%.

What is driving this sell-off? On Friday, Amazon.com's stock closed at $198.79 per share, down more than 23% from its recent high. Most major tech stocks declined, with Apple Inc. and NVIDIA Corp. falling over 2%, and Meta Platforms, Inc. dropping more than 1%. The Wind US Tech Seven Giants Index fell 1.31%.

The Mag7 have suffered heavy losses this year. Microsoft Corp. entered a bear market on January 29. As of Friday's close, its stock was down 27.8% from its recent peak. Meta Platforms, Inc. could be the next Mag7 member to enter a bear market; its shares are down 19.6% from last year's high, just 0.4% away from the 20% decline threshold.

Statistical analysis shows that all Mag7 companies have seen significant market cap contraction this year, with a total value loss of about $1.51 trillion.

Furthermore, the recent 13F filings from UBS and Goldman Sachs detail substantial减持 across multiple tech giants. In Q4, UBS reduced its holdings in Microsoft Corp. by 2.32 million shares (7.64%), Apple Inc. by 5.267 million shares (10.57%), Amazon.com Inc. by 1.658 million shares (4.57%), and Alphabet Inc. by 2.2 million shares (9.05%). UBS also trimmed positions in other tech stocks like Micron Technology, Inc., Oracle Corp., Advanced Micro Devices, Inc., and Western Digital Corp. to varying degrees.

Goldman Sachs similarly reduced its stake in Microsoft Corp. by 3.197 million shares (5.86%), Tesla, Inc. by 2.47 million shares (8.27%), Broadcom Inc. by 3.433 million shares (9.33%), and Meta Platforms, Inc. by 2.414 million shares (13.51%).

What is happening? An interesting parallel phenomenon is occurring simultaneously in the A-share market alongside the Mag7 decline. For instance, Agricultural Bank of China Ltd., a large-cap stock that had seen huge gains in recent years, has fallen nearly 24% from its peak. Industrial and Commercial Bank of China Ltd. has also dropped from CNY 8.25 per share to CNY 7.11 per share. This suggests a potential shift in global investment trends.

The reasons behind these changes are multifaceted. On one hand, specific factors may be at play, such as investor skepticism about whether the AI-related expenditures of tech giants will generate sufficient returns, and concerns that increased capital expenditure could turn free cash flow negative this year. On the other hand, broader global liquidity conditions and the macroeconomic landscape are also influential.

Recently, the U.S. overnight reverse repurchase facility fell to a very low level of $377 million, indicating that short-term liquidity in the U.S. market is largely depleted. Meanwhile, although the Dow Jones Industrial Average and S&P 500 rebounded, the U.S. leveraged loan index declined, suggesting that deleveraging pressures remain strong.

On the last trading day before a holiday, spillover effects from U.S. dollar liquidity risks again impacted performances in the Asia-Pacific markets. Regarding the U.S. dollar and its liquidity dynamics, GF Securities Co., Ltd. posits that the market has not fully priced in the potential implications of a hypothetical nomination of a new Fed Chair. They suggest the core issue is a potential paradigm shift from "central bank balance sheet expansion supplying liquidity" to "deregulation unleashing private credit." This introduces new uncertainties for the U.S. dollar's standing and liquidity assessments for emerging markets. The dollar's trajectory might evolve from a unilateral weakening in 2025 to increased volatility in 2026 due to overlapping expectations, followed by a potential recovery after the interest rate cutting cycle concludes. The favorable period for assets driven by dollar liquidity may gradually change in character.