11/18 U.S. stocks slump as 13F impact and Nvidia earnings vigilance flows in

The U.S. stock market started lower as expectations for a rate cut weakened due to Fed Vice Chairman Jefferson’s remarks, but Alphabet (+3.11%) led the index to rise. However, it fell after related companies showed sluggish performance on the news that institutional investors reduced AI-related stocks except for some large companies through 13F. In addition, as credit card companies’ loan net depreciation rate increased, it reflects loan instability and burdensome financial stocks including regional banks. Eventually, the U.S. stock market fell to reflect weakening expectations for a rate cut, sluggish AI companies, 13F’s impact, and loan insolvency (Dow -1.18%, Nasdaq -0.84%, S&P 500 -0.92%, Russell 2000 -1.96%, Philadelphia Semiconductor Index -1.55%)

*Variants: Fed Members Remark, Hardware and Semiconductor Industries

Jefferson, the Fed’s vice chairman, noted in early trading that the current economy has only had a temporary impact on shutdowns, which are not significant, and that downside risks to employment have increased in recent months while upward risks to inflation have somewhat decreased. In fact, the job market is gradually cooling down, with unemployment expected to remain slightly above 4.3 percent by the end of the year. As for prices, the progress toward achieving the 2% target has stalled, at less than 3 percent, similar to a year ago, mainly due to tariff effects. The monetary policy stance stressed the need for gradual progress as we approach neutral interest rates.

Meanwhile, Fed director Waller argues that the job market has stagnated and the hard data looks solid, but the soft data is balanced against hiring and firing. He notes that prices are well-fixed because tariff concerns were smaller than expected and are one-off. He argues for justification for a rate cut, noting that growth is slowing down quickly, more consistent with employment data. In addition, the stock market is supporting the consumption of high-income people, but the demand is slowing down for those below the middle class, citing anxiety about consumption. In addition, the job market argues that the decline in demand is a bigger factor than the decline in supply, and that interest rates should be cut in December as risk management.

Morgan Stanley’s report is also a hot topic. Investment opinion on related companies and downgrade target stock price, saying that risk of hardware margin pressure increased as semiconductor super cycle intensified. As a result, related stocks fell sharply. In particular, the price of NAND, a key component, is undergoing an unprecedented rise in memory prices, with spot price of NAND soaring 50% and DRAM soaring 300% over the past six months. The surge in prices is driven by rising demand for hyperscalers, changes in HBM mix, and underinvestment in NAND. Memory accounts for 10% to 70% of hardware raw material costs and risks falling gross margin considering the past memory cycle. Morgan Stanley assessed that the less robust IT spending environment for companies and sluggish demand for non-AI hardware also strengthened the risk of margin pressure.

This deterioration in margins for hardware customers does not directly affect the performance of semiconductor companies in the short term, but it is noted that it affects price bargaining power and memory purchases in the long run. This is because semiconductor inventories have tended to increase in the past after negotiations or purchase cuts by hardware companies. After all, the news of slowing margin rates for hardware companies is a pattern of the second half of the semiconductor super cycle between 2016 and 2018, and the possibility of entering the middle and late cycle should be checked. However, as demand from the AI industry’s increased capital expenditure remains strong, it is also expected that memory companies will aggressively expand their facility spending. Semiconductor companies have slowed down as a result, while semiconductor equipment companies have remained solid. In the end, the importance of Nvidia’s performance is further strengthened as we should pay more attention to the expansion of the AI industry and the expectation of still rising demand.

*Featured Stocks: Alphabet Up Vs. Semiconductor, Big Tech Stocks, Bitcoin, Theme Stocks Slump

Big Tech: Alphabet rises amid Perkshire Hashware 13F impact Vs. Apple falls
Alphabet (+3.11%) rises on news Berkshire Hathaway has bought new shares. However, the increase was partially reduced, reflecting that it is not free from the controversy over capital expenditure and monetization of the AI industry. Amazon (-0.78 percent) fell on the news of the issuance of $15 billion worth of corporate bonds. It is noteworthy that major technology companies are increasingly issuing corporate bonds to pay for increased capital expenditures to build AI data centers. Apple (-1.82%) fell on the news that Berkshire Hathaway is continuously putting up for sale. Meta Platforms (-1.22%) and MS (-0.53%) are also sluggish amid controversy over AI monetization

Automobiles: Tesla Returns Higher In The wake of EV Industry Unrest After Rising On News Of Upgrades
Tesla (+1.13 percent) rose as it reportedly asked its suppliers to exclude parts from China in U.S. manufactured vehicles over the weekend, reflecting expectations for the restructuring of supply chains and efforts to reduce its dependence on China. On top of that, Stifel’s decision to raise its target price from 483 dollars to 508 dollars is very important, reflecting the importance of AI-based FSD technology and company stories such as robotaxi. However, anxiety over the electric vehicle industry still lingers, and the increase has been reduced. Rivian (-1.59%) and Lucid (-9.08 percent) are also sluggish. Secondary battery companies such as QuantumScape (-3.57%) are also sluggish.

Cars: Used Car Companies Slump On News Of Ford’s Amazon Contract
Ford (-2.35%) also fell on the news that it could sell used Ford cars on Amazon. On the related news, Hertz Global (-6.90%) signed a contract with Amazon in August, and on the news that Amazon signed a contract with Ford this time, Carmax (-6.74%) fell amid concerns over intensifying competition, and Kavanagh (+1.51%) had its own platform, reflecting the expectation that online used car sales could increase in the long term. GM (-3.70%) also fell due to concerns over loan instability and sluggish car sales.

Lithium-Related Stocks: Expectations Strong on China’s Carbonated Lithium Price Surge
Lithium-related stocks such as Albemarle (+2.22%), SQM (+9.02%), and Lithium America (+6.95%) are carbonated in China