Reasons behind the sharp pullback in US and Korean equities over the past month

Over the past month, US and Korean equities have simultaneously experienced a sharp pullback. On the surface, this has been attributed to news narratives such as Meta’s excess computing capacity, interest rate hike expectations, AI bubble concerns, and worries about memory demand cycles. However, the core underlying cause has been massive capital outflows driven by two back-to-back mega IPOs of historic scale: global institutional investors aggressively sold shares of the Magnificent Seven Nasdaq stocks, US memory leaders, and major Korean blue-chips to secure discounted primary-market allocations in SpaceX and SK Hynix, creating intense selling pressure.

The combined indicative subscription demand exceeding USD 300 billion and USD 200 billion vividly illustrates the frenzy among investors to secure allocations, which translated into sustained selling pressure in secondary markets. SpaceX ultimately raised USD 75 billion and SK Hynix USD 26.5 billion—totaling approximately USD 101.5 billion—which has been permanently withdrawn from secondary markets and transferred into corporate accounts, with no intention of returning to equities.

With SK Hynix now listed on the US stock exchange and both mega IPO subscription payment windows closed, the forced liquidity drain has ended. Idle capital previously rotated out will gradually flow back into oversold tech and memory stocks, likely reducing market volatility and setting the stage for a period of range-bound, steady recovery.

Explanations offered to the public—such as Meta’s excess AI computing capacity, interest rate hike expectations, AI bubble concerns, and cyclical memory demand—are all superficial, post-hoc justifications. The real driver has been the massive, market-wide capital suction caused by two blockbuster IPOs.

Financial media and brokerage analysts amplify publicly available news about Meta and the Federal Reserve, providing retail investors with a 'plausible reason' for the market decline;

Wall Street institutions quietly complete portfolio rebalancing and accumulate new IPO shares at low prices. Once the IPO dust settles, they pivot sentiment toward bullish calls on tech and memory stocks to realize gains in a second wave of rallies.

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