As the deepening conflict between Iran and the US pushes oil prices higher and increases pressure for interest rate hikes, the index faces downward pressure. However, strong earnings from S&P 500 companies and the growth potential of semiconductor firms are sustaining the market.
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The US stock market index declined today due to falling oil prices. Investors sold off holdings in disappointment after expected negotiation results failed to materialize, and oil prices continued to rise, impacting stock prices. A general sense of disappointment dominated the market.
Major technology companies engaged in cloud businesses showed a rebound in stock prices. Companies like Google, Amazon, and Microsoft saw their stock prices gradually increase, maintaining a favorable trend. This is analyzed as reflecting continuous demand and growth potential for cloud services.
Rising oil prices will inevitably lead to higher interest rates, which is expected to be a continuous burden on the stock market. International oil prices remain around $82 per barrel, but there is a high possibility of breaking through $90. If oil prices surpass the $90 mark, concerns are growing that the stock market's upward momentum will weaken. High oil prices can increase production costs and inflationary pressure, strengthening central banks' stance on interest rate hikes.
As market instability increases, a preference for safe-haven assets is becoming prominent. Gold prices rose by over 1%, showing strength, and the dollar also strengthened. The dollar's strength was particularly highlighted by the deepening depreciation of the Japanese Yen. This phenomenon reflects investors' tendency to seek safe-haven assets rather than risk assets amid uncertain economic conditions.
The S&P 500 index focused on the possibility of an agreement on the Hormuz maritime bill but showed rigidity against downward movement with no significant fluctuations. Iran's foreign minister made hawkish remarks, pointing to violations of the June memorandum and lack of compensation, stating there was no possibility of resuming negotiations. This increased doubts about resolving the dispute between the US and Iran, and oil prices are bound to continue rising. Intel's stock price fell 4% after announcing a $15 billion common stock issuance.
Former President Donald Trump stated that in negotiations with Iran, Iran must take responsibility for the damage and deaths inflicted on the people of Lebanon, Syria, Yemen, and Gaza. He added that Iran is demanding compensation for damages incurred during military conflicts over the past five months, a demand never mentioned in any previous negotiations or talks.
Of the S&P 500 companies that have reported earnings so far, 87% have exceeded analysts' expectations. This represents a 31% rate of companies beating estimates, much higher than the average beat rate of 9% in the previous quarter. Even excluding one-time factors, the average quarterly earnings surprise for S&P companies remains 11% higher, leading to the conclusion that corporate earnings are supporting the market.
Intel plans to sell $15 billion worth of stock after its share price rose 400% over the past year. This is aimed at securing future growth momentum and raising capital for expenditures, and will be carried out through a public offering of common stock. With this large-scale fundraising, Intel appears to be aiming to secure investment capacity for future growth.
Intel reported its strongest revenue growth in 15 years in its earnings report late last month, driven by surging demand for data center central processing units (CPUs). As CPUs became central to the artificial intelligence (AI) competition, demand for these chips exceeded supply, allowing Intel to also raise prices. This demonstrates that Intel's CPU technology plays a crucial role even in the AI era.
SanDisk recorded very high margins with a gross profit (GP) margin of 84% and an operating profit (OP) margin of 78%, but its price-to-earnings ratio is analyzed as undervalued at 5.5x. Micron Technology also shows excellent margins with a GP margin of 84% and an OP margin of 86%, but its price-to-earnings ratio is undervalued at 5.9x. It is noteworthy that companies with such high margins are undervalued.
Memory-centric semiconductor companies like Seagate, SanDisk, and Micron Technology are currently significantly undervalued in the market. Nevertheless, their operating profit (OP) margins and gross profit (GP) margins remain high. This suggests that their stock prices are low compared to the companies' intrinsic value.
The low price-to-earnings (P/E) ratio of semiconductor companies, particularly those producing computer memory chips, reflects investors' concerns about the industry's cyclical nature. The fact that both companies' margins were much lower a year ago exacerbates these concerns. Therefore, it appears that investors are not assigning high P/E multiples despite the currently high margins, due to uncertainty about future economic fluctuations. This is because the semiconductor industry tends to experience repeated booms and busts.
Nvidia's recent stock price decline is due to its announcement of increasing capital expenditures through a $50 billion artificial intelligence (AI) financing deal with major Wall Street investors, including Apollo, Blackstone, and Goldman Sachs. News of this large-scale fundraising impacted the stock price, and analysts suggest that investors' profit-taking further fueled the decline.
The average selling price of high-bandwidth memory (HBM) increased by 79% year-over-year, and HBM4 is expected to exceed $30 per gigabyte. DRAM contract prices are projected to rise by approximately 20% quarter-over-quarter, with Micron Technology anticipating increases of 20% in Q3 and 11% in Q4 quarter-over-quarter. For NAND flash, Q3 contract prices rose by 20% quarter-over-quarter, with enterprise NAND specifically forecast to increase by 23%, indicating an overall rise in contract prices.
The NAND flash and SSD market maintains a positive demand environment thanks to stronger-than-expected demand for servers, storage, and SSDs themselves. This offsets weakness in the personal computer (PC) and smartphone markets, driving overall market growth. Particularly, as data center construction and expansion become more active, demand for NAND and SSDs is strengthening further.
A key reason memory companies can sustain growth is the steady increase in capital expenditures (CAPEX) for data centers. The total CAPEX of major big tech companies like Amazon, Microsoft, Alphabet, Meta, and SpaceX increased from $115.2 billion in 2017 and is expected to continue rising in 2027. SpaceX also saw its CAPEX increase from $83.1 billion in 2010 to $99.4 billion, and these large-scale investments are expected to drive continuous growth for memory companies.
Wall Street has been very positive about recent initial public offerings (IPOs), with Bank of America particularly highlighting Cyxtera's IPO and predicting that data center-related businesses could double in growth. Cyxtera is analyzed as offering an overlooked investment opportunity in the rapidly growing data center market, potentially yielding significant returns. Cyxtera sold 50 million shares at $21 per share.
Cyxtera possesses three core strengths. First, it has the capacity to address the current situation where data center supply cannot keep pace with demand. Second, it can help resolve bottlenecks in artificial intelligence (AI) and enterprise data centers by reducing time to market and development costs. Third, as this growth accelerates, Cyxtera's stock multiple is likely to increase further, making it an attractive investment.
Chainlink has experienced significant losses to date, but as a decentralized finance (DeFi) infrastructure provider, it supports approximately 70% of the global DeFi market. This has enabled over $32 trillion in transaction value, and it is considered the only solution capable of providing all essential functions for asset tokenization, including reliable data, secure interoperability between networks, regulatory compliance for privacy protection, and integration with existing financial systems.
Chainlink's potential for a 25x increase from its current price depends on the successful execution and expansion of the tokenized asset economy. Investors should closely monitor whether Chainlink's fees increase as tokenized assets continue to grow and whether Chainlink technology continues to be adopted as a standard infrastructure layer. Conversely, risks exist where delays in institutional adoption, lower-than-expected revenue generation, or being outcompeted by rivals could undermine the company's value.
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