Dow hits new highs, Korean stocks V-shaped reversal: Has the AI market changed?

From the market close on October 20 to the morning of October 21, the global market did not provide a unified directional signal. The Dow Jones Industrial Average reached a historic high, while the Nasdaq remained almost unchanged. South Korean stocks fell 3.73% the previous day, but rebounded 3.79% in the morning of the next day. Oil prices surged above $101, briefly returning to $95, and closed with a slight drop of 0.37%.

Putting these prices together, what emerges is not that "AI has been sold off," but rather that the same pool of money is changing positions. What is being sold off are assets that "rely on external financing to continue the story," while what is being bought are assets where "revenue and cash are already on the books." The two earnings reports from SpaceX and 3M coincidentally placed this dividing line on the same night.

1. Dow Jones Hits Historic High, Funds Shift to Cash Flow Certainty

3M rose 5.78% that day, making it one of the main drivers of the Dow. The earnings report itself was not exaggerated: third-quarter sales were $6.6 billion, a year-on-year increase of 1%, adjusted earnings per share were $2.50, a year-on-year increase of 12%, and the full-year adjusted earnings per share guidance was raised to $9.10 to $9.15.

What truly drove the stock price up was another line in the same announcement: 3M is expanding its cooperation with Amazon, promoting the volume of optical connection and other data center products, and issuing warrants for up to 3.2 million shares of common stock to Amazon, with the exercise conditions linked to cumulative sales of $6 billion for related products over the next seven years.

This announcement indicates that AI orders have already penetrated "old economy" companies. The difference lies in the payment method. 3M is building capacity and securing orders with operating cash flow, with Amazon as the customer. The price the market gives corresponds to "orders signed, cash received."

On the same night, Eli Lilly rose 3.49% to a historic high, Amgen rose 3.29%, the healthcare sector rose about 2.3% to a historic high, and the Russell 2000 rose 1.65%. In contrast, communication services fell 0.89%, information technology fell 0.34%, Meta fell 1.59%, and Apple fell 1.00%.

The new high for the Dow seems more like a categorization rather than a "revival of the old economy." One category of orders is linked to already generated cash flow, while the other is tied to construction plans that still require continued financing. Funds are pushing the former category up while leaving the latter in place.

2. SpaceX Delivers High Growth Report, South Korean Stock Elice Plummets, AI Market Begins to Differentiate

After hours, SpaceX released its second earnings report since going public. Third-quarter revenue was $14.575 billion, a year-on-year increase of 161%, exceeding market expectations of $12.8 billion. AI business revenue was $7.56 billion, a year-on-year increase of about 830%, surpassing the combined revenue of Starlink and launch services for the first time. Net profit was $4.404 billion, compared to a net loss of $1.054 billion in the same period last year.

Capital expenditures are also soaring, reaching $19.593 billion, a year-on-year increase of 185%, primarily directed towards AI computing power. The market reacted positively, with after-hours stock prices rising nearly 8% to around $159.

The reason is not complicated. AI revenue growth of 830%, capital expenditure growth of 185%, with revenue outpacing expenditure. This is the structure the current market is willing to pay a premium for.

On the same night, South Korean AI cloud service provider Elice fell 32% on its first day of trading in Seoul, but rebounded 16% in the morning of the 21st. On the U.S. side, Micron fell 0.98%, ASML fell 0.99%, Applied Materials fell 1.97%, KLA fell 2.80%, and Arm Holdings fell 3.07%.

AI has not been entirely abandoned; what is being repriced is the segment where "expenditures have occurred, but revenues have not yet been proven." This distinction can be tested with two growth rates: whether the growth rate of AI-related revenue is higher than the growth rate of capital expenditures. If tonight Meta's capital expenditures continue to be revised upward while revenue growth falls below 30%, this dividing line will shift from marginal assets like Elice to large-scale firms.

3. South Korean Stocks Plummet One Day and Rebound the Next, Foreign Capital Re-enters

On the 20th, the KOSPI fell 3.73% to 5552.74 points, at one point dropping 4.76% to 5493.24 points, marking the lowest close since April 7. On that day, individual investors net bought 898.2 billion won, while foreign investors net sold 533.3 billion won, and institutions net sold 1.0048 trillion won.

In the morning of the 21st, the index turned around. At 9:32 AM Korean time, the KOSPI rose 3.79% to 5763.03 points, Samsung Electronics rose 6.15% to 224,500 won, and SK Hynix rose 7.44% to 1,314,000 won. Foreign investors net bought 447.1 billion won, institutions net bought 137.7 billion won, and individuals net sold 676.3 billion won.

The buyers and sellers switched positions overnight. On the 20th, retail investors were the buyers, while on the 21st, it was foreign capital and institutions.

There is another layer of detail: although foreign capital net sold overall on the 20th, it net bought Samsung Electronics for the third consecutive trading day, with net purchases of 198.9 billion, 270.8 billion, and 383.5 billion won over three days, while continuing to sell Hynix. According to South Korean media reports, JPMorgan believes that South Korean stock valuations are no longer high, but the slowdown in share buybacks by listed companies is an important reason for the recent decline, with Samsung's buyback completed and Hynix nearing the end.

Looking at these two days together, the dominant variable seems to be the chips rather than the fundamentals of South Korean AI. Since late August, the main buying power supporting the index has been buybacks, and once buybacks retreat, even small movements can be magnified. If foreign capital turns back to net selling after Meta's earnings report tonight, the rebound in the morning of the 21st is more likely to be a short covering rather than a trend change.

4. Oil Prices Return to $100 Mark, Inflation Risks Still Not Resolved

On the 20th, WTI's main contract peaked at $101.37 during the day, reaching a new high in over a month. Subsequently, reports emerged that U.S.-Iran negotiations might achieve a breakthrough as early as this week, causing oil prices to briefly fall to $95.2, a drop of over 6%. After the reports were denied, prices returned to around $98, closing at $98.18, down 0.37%. Brent closed at $109.16, down 0.36%.

The yield on the 10-year U.S. Treasury fell 3 basis points to 5.11%, while the 2-year yield rose 1 basis point to 4.78%. The dollar index fell 0.27% to 101.70. Spot gold fell 0.38% to $4,124.48, while spot silver rose 1.61% to $57.98. The newly released data showed that new housing starts in September fell 5.2% month-on-month, the lowest since May.

A decline in long-term yields does not equate to cooling inflation. The two clues from that day were the drop in oil prices and safe-haven buying driven by concerns over French finances. The 2-year yield is still rising, indicating that the market has not priced in an "end to rate hikes."

The drop in gold and the rise in silver also indicate that safe-haven demand has not overall increased. Silver has a heavier industrial property, used in photovoltaics and data centers. Gold has a heavier monetary property and reacts more significantly to changes in real interest rates.

One way to test this is to see that the marginal pricing power of inflation is now in the Strait of Hormuz, not in the Federal Reserve's conference room. If WTI reclaims $100 and stays there for several trading days, the differentiation of "Dow rises, Nasdaq does not" may reverse.

5. Meta and Tesla Earnings Reports Approaching, Can AI Investments Translate into Cash Flow?

Both Meta and Tesla will disclose their third-quarter results after the U.S. market closes on the 21st.

Meta's second-quarter revenue was $60.801 billion, a year-on-year increase of 28%, with capital expenditures of $30.12 billion and free cash flow of $1.75 billion, down from $9.02 billion in the same period last year. The company previously provided a capital expenditure guidance of $130 billion to $145 billion for 2026. The market expects third-quarter revenue to be around $63.2 billion, a year-on-year increase of about 23%, with earnings per share of about $6.54, a year-on-year decrease of about 10%.

The most striking aspect is the free cash flow. In the second quarter, capital expenditures were already close to the operating cash flow for the quarter, leaving only $1.75 billion in free cash flow. If capital expenditures rise again in the third quarter, this number will be even thinner.

Tesla delivered 486,500 vehicles in the third quarter, a year-on-year decrease of 2%, with market expectations for revenue of about $27.8 billion and earnings per share of about $0.43. The focus is not on delivery volume but on automotive gross margins and Robotaxi operational data.

Both companies are addressing the same question: can the growth rate of capital expenditures be matched by the growth rate of revenue? SpaceX provided the answer of "yes" last night, and the market responded accordingly. Meta needs to provide its version. If Meta raises capital expenditures while free cash flow continues to decline, the previous dividing line will shift from marginal assets to giants. If capital expenditures are no longer revised upward and advertising revenue stabilizes, the differentiation may narrow.

6. AI Market Has Not Receded, Market is Repricing

From last night to this morning, money has not left AI; it has simply changed its pricing method: first looking at the speed of revenue realization, then looking at the scale of capital expenditures.

The overnight reversal in South Korean stocks indicates that short-term volatility is more influenced by chips and oil prices rather than a final judgment on AI demand.

Whether this round of differentiation can continue depends on two sets of numbers after tonight: Meta's capital expenditures and free cash flow, and whether oil prices can hold below $100.

Risk Warning: This article is compiled based on publicly available information, and the data involved is subject to company announcements and public reports, and does not constitute any investment advice.

Data Explanation

• U.S. stock indices, sectors, and individual stocks: Exchange closing and media market summary, October 20, 2026.

• Asia-Pacific stock markets and South Korean capital flow: Korean Exchange, South Korean media reports, from the closing on October 20, 2026, to October 21, 09:32 (during trading).

• SpaceX, 3M: Company announcements, October 20, 2026.

• Commodities, dollar, and U.S. Treasuries: Media market summary, closing on October 20, 2026, with WTI as the main contract.

• Meta, Tesla: Company earnings reports and institutional summary expectations, October 20, 2026.

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