New York Stocks Rise Amid Falling Oil Prices and Interest Rates

Concerns have been raised that Nvidia's business model concentrates AI risks in one place. Worries exist that providing financial support to cloud providers could exacerbate financial pressure if sales and profits decline. An analysis suggests there is a structural weakness where risks from the entire AI industry could converge on Nvidia.

Rumors of a US-Iran ceasefire, fueled by a report from Russian news agency RIA, led to a drop in oil prices and a slight rise in the market. However, with no official confirmation from either the US or Iran, the market remains skeptical of the report's veracity. While the decline in oil prices was partially reflected, uncertainty persists, and further confirmation is widely deemed necessary.

Consumer confidence data came in below expectations, and new home sales were sluggish. This fueled market skepticism about future interest rate hikes. Experts infer that with consumer expectations continuously falling, further rate hikes may be difficult. These indicators are expected to be significant variables in the Federal Reserve's monetary policy decisions.

The U.S. has threatened a 50% retaliatory tariff on Canadian goods, but the effective date is set for January 1 next year, leaving room for negotiation. The market interprets this as political rhetoric from former President Trump, aimed at the mid-term elections. Analysis suggests the tariff measure is less likely to lead to actual trade conflict and more intended to influence voters before the election.

When it comes to tariffs with Canada, they're also imposed starting January 1st next year. So, it's August now, and January 1st next year is still a long way off, and it could be abolished through negotiations during that time. Ultimately, I think it will have some impact before the election. So, I'm thinking this is a mid-term election period.

With the persistent high-bandwidth memory (HBM) supply shortage, Nvidia is pushing for a Rubin chip design change that reduces the number of HBM stacks and dies. This is seen as a short-term alternative to preserve Nvidia's profitability. However, some analysis suggests these changes could be a potential negative for substrate and memory-related stocks. Interest is growing in the impact of Nvidia's strategic shift on the broader semiconductor ecosystem.

Over the past three years, Nvidia's stock has mostly risen about a week before earnings announcements and then fallen immediately after. The recent decline of around 5% over eight days is not particularly unusual compared to this historical pattern. Investors tended to buy shares in anticipation of a price increase before earnings, and often, profit-taking after the announcement led to a decline in the stock price.

Nvidia's Q3 (August-October) revenue consensus has been adjusted upward from $103 billion to $108 billion. However, annual growth expectations have been slightly lowered from 97% to 90%. This is interpreted as reflecting market concerns that while the revenue scale will increase, the growth rate itself may slow down.

Their Q3 and Q4 are August, September, and October, and the consensus has actually gone up a bit, even though the stock price fell, didn't it? It was originally $103 billion, but now it's expected to be up to $108 billion. If it comes out at $108 billion, then it's still 90% year-over-year.

An analysis suggests that Nvidia's stance on AI financing will be more important than its earnings and guidance during this earnings announcement. This is because Nvidia is increasing its financial support (loans and guarantees) for funding AI data center construction. This is interpreted as an attempt to quell market concerns about circular financing and to alleviate market instability by Nvidia acting as a financial lifeline for the AI market.

Continued investment in AI data centers presupposes a steady growth in token production demand, meaning a tenfold or more increase in demand each year. Even if prices fall by 80-90% in this process, a corresponding increase in volume is essential to offset it. The introduction of agent AI is expected to be the key driver for explosive growth in token demand. A warning was also issued that if token demand falters, all investment plans could be jeopardized.

The provisional agreement on performance-based pay reform, reached by SK Hynix labor and management, was rejected by the union. Out of a total of 15,045 votes, 7,510 were in favor and 7,535 were against, failing by a margin of 25 votes. The reform plan included provisions for 40% of the total performance pay to be in cash and 60% in stock, with the option to choose 40% of the stock portion in cash only for the 2026 performance pay, and provisions for loss compensation in case of stock price decline.

Hyundai Motor's labor and management agreed to a 100,000 won increase in basic salary, welfare points, and stock grants. Notably, they decided to hire 200 new technical staff in the second half of next year and 300 technical staff in 2028. This is positively evaluated for finding a future-oriented agreement through discussions on labor issues related to retirement age extension and the transition to electric vehicles. Unlike in the past, efforts to resolve employment issues through constructive dialogue were notable.

Russian state news agency RIA Novosti reported that the US and Iran had agreed to a ceasefire and that an announcement could come within days. The market reacted sensitively to this news, with oil prices falling significantly to around $81 and Treasury yields also declining. The market reacted keenly to the report, but with no official confirmation yet, it is watching for follow-up reports.

The KOSPI market saw an inflow of buying at lower prices, creating a long lower shadow candlestick and rising 5% from its low. In the nuclear power sector, Doosan Enerbility rose over 10%, extending its gains. Semiconductor equipment and materials stocks like Jusung Engineering and HPSP also ranked high in market capitalization, turning positive in the afternoon. This phenomenon is interpreted as a technical rebound driven by supply and demand factors.

The market is showing a rotational pattern rather than continuous gains, taking a day or two to rest. Thus, a strategy of listing all industries and buying when stock prices fall is deemed effective. In particular, advice was given to focus only on core stocks where market money is flowing. It was emphasized that money does not spread to peripheral stocks, so it is important to select 'strong stocks'.

Concerns were raised about government intervention in the bond market, citing a case where Druckenmiller criticized Secretary Bentsen's policies. He argued that governments attempting to artificially defend prices against fundamentals ultimately fail. This points to the limitations of market defense through artificial supply and demand control, sharing lessons learned from experience in overseas bond markets.

While the market bottom is rising, the decline from the high point is still significant, suggesting that additional buyers' volume needs to be digested. This is because many investors who bought additionally at lower prices are currently hovering between profit and loss. Therefore, time is expected to be needed to resolve this selling pressure for the market to rise stably.

That's why some volume digestion is needed. Because there are people who added to their positions at the bottom and are now hovering between profit and loss.

An analysis suggests that in a market with low trading volume, the phenomenon of supply and demand concentrating in semiconductors is actually advantageous. Although a long position in semiconductors is maintained, it was explained that even if semiconductor stock prices fall due to Nvidia's earnings, etc., it is much better for them to fall with concentrated supply and demand. This emphasizes that when market interest and capital are focused on one area, the direction of that sector becomes clearer.

It is observed that Nvidia may experience temporary profitability strains during the launch and ramp-up of new products. It is common for new products to negatively impact profitability until they are fully established in the market and volumes explode. A similar decline in profitability was cited during the launch of the Blackwell new product in the past.

Samsung Electronics' free cash flow (FCF), used for shareholder returns, does not include prepayments. In addition, M&A (mergers and acquisitions) costs are not deducted from FCF, according to a company official. SK Hynix also shared these funding calculation criteria in an analyst meeting after its disclosure. These are important criteria for evaluating a company's cash flow and determining the scale of shareholder returns.

Regarding the issue of a separate listing for SK Hynix's Solidigm, the company stated that nothing has been decided yet and that the company has very limited information. It was also analyzed that there are no clear advantages for SK Hynix to list Solidigm separately. Therefore, it is projected that the possibility of aggressively pursuing an additional Solidigm listing in the current situation is low.

The AIHY ETF implements a strategy that focuses on hyper-scalers, including big tech companies like Microsoft, Amazon, Alphabet, and Meta as its top holdings. Most of the well-known hyper-scaler companies are included, along with some Chinese hyper-scaler firms. Investors can find specific investment ideas by checking the ETF's PDF disclosure.

Within just two months of the proliferation of AI agents, non-human internet traffic has surpassed human traffic. This indicates a rapid increase in the proportion of AI-driven activity in internet usage. This shift is acting as a factor increasing demand for security services from cloud players.

Druckenmiller warned against artificial intervention in the bond market, such as the Treasury's bond buyback policy. He argued that a healthy decline in Treasury yields can only occur by addressing the fiscal deficit, and that the government should not artificially intervene in the market. He expressed concern that such intervention could exacerbate inflation risks without resolving the fiscal deficit.