Will AI Save the Stock Market Amidst US Rate Hikes?

For the first time in three years since July 2022, the U.S. Federal Reserve (Fed) raised its benchmark interest rate by 0.25 percentage points, from 3.75% to 4.00%.

This was a unanimous decision, and major countries including South Korea, Europe, and Japan are also joining the interest rate hike cycle with the goal of price stability.

The Federal Reserve Chairman stated that his patience had reached its limit as inflation continued to rise.

He believes the U.S. economy has the fundamental strength to withstand interest rate hikes, adding that key economic indicators show improvement despite geopolitical uncertainties.

2022 was a period of unprecedented tightening, with the stock market plummeting throughout the year as the Federal Reserve raised its benchmark interest rates.

The current interest rate hike cycle, guided by the Fed Chairman, is expected to proceed at a much more moderate pace than before, and the market believes it can absorb this level of tightening sufficiently.

This is because not only is national and corporate AI investment continuing to expand, but demand for semiconductors is also increasing from individual companies and research institutes beyond just big tech companies.

Nvidia raised its revenue outlook for next year from an existing 70% increase to a twofold increase, anticipating explosive growth in the AI semiconductor market.

Intel's CEO warned that the shortage of its flagship CPU product would worsen next year, and memory shortages would also intensify.

ARM's CEO stated that supply constraints, rather than interest rate hikes, are the key market issue, and the impact of rate hikes is limited due to the high expected returns of AI.

AI startup Anthropic aims to secure 5 gigawatts (GW) of computing capacity by the end of this year, and 10 GW next year, the New York Times reported.

This is more than six times the 1.5 GW at the end of last year, a similar infrastructure goal to OpenAI, and according to CNBC, the company is signing contracts for both large and small data centers.

Data center company Nevius announced a 20% increase in rental fees starting in October due to surging demand.

Apple is considering entering the artificial intelligence (AI) server market for the first time in 18 years, showing strong demand for building its own AI servers, and Meta's AI assistant app 'Muse' topped U.S. App Store downloads, raising expectations for the AI market.

This service, similar to YouTube and Netflix's subscription model, targets 3 billion users and has driven strong stock performance on expectations of improved cash flow.

Increased data center rental demand from Anthropic and reports of Meta leasing data centers to Anthropic led to a synchronized rise in Nvidia, Apple, Meta, and Alphabet stock prices.

Alphabet's stock reflected anticipation for the launch of its next-generation Gemini 4th model, and SpaceX also joined AI infrastructure stocks due to increased data center rental demand.

Considering future expandability in robotics and automobiles, existing chips would struggle to meet demand, and to overcome the site, power, and regulatory limitations of terrestrial data centers, he announced plans for full-scale operation of space data centers starting in 2027.

U.S. President Trump accelerated policy support, including creating an AI military and appointing an AI Tsar, stating that artificial intelligence (AI) is a key driver of U.S. and global GDP growth.

He described AI and data centers as the most powerful economic development drivers in history, asserting they would have a greater impact than the Industrial Revolution, oil, gold, or even the internet.

President Trump staked his all on AI, predicting its contribution to GDP could grow to 25%.

Capital is flowing into industries that receive strategic policy support from the U.S. administration.

The announcement of eased cryptocurrency regulations has raised market expectations, and Soosoo Monkey stated that it holds diversified crypto-related assets as part of its asset allocation.

The Commodity Futures Trading Commission (CFTC) drafted and submitted its own regulatory proposal to the White House, fearing delays in political consensus, which raised expectations for increased market participation from related stocks like Robinhood and Coinbase.

These measures signify that the cryptocurrency deregulation announced at a meeting chaired by President Trump in August has entered the implementation phase.

Currently, late September to early October is the seasonally weakest peak period of the year, with investor sentiment dampened by geopolitical risks and the fear index (26-29).

It is expected that the market will see a favorable turn after this period, with a strong possibility of a year-end Santa Rally, especially as uncertainties are resolved after the election.

The U.S.-China summit is anticipated to be a positive event for the market.

Chinese President Xi Jinping is scheduled to visit the U.S. on September 23, with top-level reception expected.

President Trump is likely to use this opportunity for a 'big deal' to showcase economic prosperity, and a relief rally may occur before and after the U.S.-China summit.

If a 'big deal' surprise emerges from the summit, it could act as a positive catalyst for the market, but there's also the persistent concern of a sell-off due to disappointment if there are no significant outcomes.

Negotiations are planned between the U.S. and major leaders of the six Gulf Cooperation Council states to resolve Middle East-related issues just before President Xi Jinping's visit to the U.S.

While visa approval for the Iranian delegation raises hopes for talks, geopolitical issues are highly likely to change daily.

The SGOV ETF is an ultra-short-term Treasury bond dividend product linked to the U.S. benchmark interest rate, and investors can expect increased interest income when the benchmark rate rises.