02/26 U.S. stock markets shrink fall on U.S.-Iran issue amid accelerated AI rotation on Nvidia earnings pretext

U.S. stocks started lower on the back of AI sector valuation concerns and cross-sector circular trading after Nvidia (-5.46%), followed by Dow’s rise and Nasdaq’s decline. Semiconductor companies led the decline, especially as Nvidia fell sharply despite better-than-expected earnings. Furthermore, it was also negative that it was sensitive to the U.S.-Iran negotiations. As a result, the market continued to open, and the Nasdaq fell more than 2%, increasing volatility. However, as positive reviews of the U.S.-Iran negotiations flowed in later in the market, the fall was reduced (Dow +0.04%; Nasdaq -1.18%; S&P 500 -0.54%; Russell 2000 +0.52%; Philadelphia Semiconductor Index -3.19%)

*Variants: Nvidia and Sector Circular Sales, Me-Iran

Nvidia reported earnings and guidance that significantly exceeded market expectations, but fell more than 5%. This is due to valuation fatigue that does not satisfy investors with any earnings surprise because market expectations are already high. In addition, doubts about the AI sector’s overheated valuation are estimated to have affected the market. Of course, there were many positive reviews by investment companies, such as raising their target stock prices based on improved performance, but disappointment that AI story’s scalability slowed due to nothing new in the earnings announcement was a factor in realizing profits

In addition, CEO Jensen Hwang’s remarks on preemptive inventory accumulation in preparation for demand in 2027 paradoxically suggest that expectations for price premium due to supply shortages are weakening and the state of orderly supply expansion. Expectations have been continuing to soar in semiconductor prices due to concerns over supply shortages, but related trends have weakened, causing the semiconductor sector to open for sale, including memory companies.

Also burdensome is the acceleration of AI rotation, in which investment companies switch from chip makers to AI service companies, as suggested by 13F in the fourth quarter. On top of this, the market is also affected by the continued capital expenditure of hyperscalers and anxiety about monetization. After all, the market is not performing better, but is demanding solid evidence of earnings that AI is changing the world

U.S.-Iran negotiations are underway amid increased U.S. forces in the Middle East and U.S. President Trump’s military pressure. The U.S. pressures to dismantle its nuclear program, limit its ballistic missile programs, and ban aid to pro-Iranian forces. Iran has put de facto easing of economic sanctions as its top priority, limiting the negotiations to nuclear issues only. There were media reports that the U.S. was disappointed in the morning negotiations, but Oman’s foreign minister announced after the end of the negotiations that significant progress had been made and that discussions would resume next week. Iran’s foreign minister also mentioned that the elements of the agreement were seriously considered in both nuclear and sanctions. As a result, the decline in the stock market has been reduced, the dollar has been strengthened, interest rates on government bonds have been reduced, and international oil prices have been lowered

*Featured Stocks: Nvidia, Micron, Tesla Down Vs. Software Companies Bullish

Semiconductor: NVIDIA Sells To News-Related Sale Drops
Nvidia (-5.46%) reported better-than-expected earnings and guidance, but fell due to the opening of sales related to “sell to the news.” Major investment companies raised their target prices, but doubts about the growth rate and semiconductor business conditions contributed to the decline. In addition, supply and demand are also burdened by the surge in volume of falling positions in the options market. Recently, some large technology stocks, including Nvidia, tend to be determined by trading short-term options such as zero-day options, monthly/weekly options, and weekly options

Semiconductors: Broadcom Falls As Competition With Nvidia Raised
Broadcom (-3.19%) announced a target to sell 1 million 3D stacked AI chips by 2027, but fell. It was affected by the intensifying competition between Broadcom and AMD (-3.41 percent), which are competing with Nvidia in related sectors, as Jensen Huang emphasized the growth of the reasoning market. In addition, in terms of valuation itself, Broadcom and AMD have raised relative value burdens in some cases rather than Nvidia, and attendance of sales across semiconductor industries is also burdensome. TSMC (-2.82%), Intel (-3.03%) and Ram Research (-4.17 percent) are also sluggish. The Philadelphia Semiconductor Index fell 3.19 percent

Semiconductors: Micron Slips As Concerns Over Semiconductor Price Surge are Raised
Micron (-3.13%) fell as Nvidia’s inventory stockpile comments were interpreted as easing the HBM shortage, raising the possibility that the surge in semiconductor prices that had been going on could be eased. Western Digital (-2.99%) and Seagate (-2.89%) also fell. SanDisk (+3.09%) rose, reflecting Bernstein’s TMT forum announcing that it was seeking long-term supply contracts with data center customers amid structural changes in the NAND market due to demand for artificial intelligence. HP (+3.29%) rose on expectations that a scenario of a surge in semiconductor prices could be eased. Dell (-1.64%) is up 7% outside the market after the company reported better-than-expected earnings.

Cars: Tesla Slips On Burden On Robotaxi
Tesla (-2.11 percent) has been mentioning that Musk will launch an unmanned robotaxi service within a few months if the California government approves it for more than a year, but it fell when the state government said Tesla made no efforts to get approval. In the meantime, Tesla’s robotaxi is cheaper than Google’s Waymo, but the news that the waiting time is longer and there are more human drivers is also burdensome. In addition, the unstable factor in China’s electric vehicle industry is also a dampening factor in investor sentiment. Ford (-0.14 percent) and GM (-1.99 percent) had news of the recall, but Ford fell flat in terms of software defects and GM fell more than 2 percent in terms of physical defects

Big Tech Stocks: Changes to Individual Issues Despite Capital Expenditure Concerns
MS (+0.28%) gained on the strength of software companies, although uncertainty over capital spending continued. Alphabet (-1.88%) announced it would apply a nano-banana 2 AI image generation model to Gemini, Searchlens and Flow, but fell to reflect the burden on capital spending. Meta Platforms (+0.51%) started lower on capital spending concerns, but the city