Global financial market tensions are rising due to a combination of increasing U.S. bond yields and uncertainty in the semiconductor market.
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The U.S. Treasury's buyback volume is expected to be announced at a level of $5-6 billion, which is below market expectations. This, along with an increase in the long-term operational limit from $2-4 billion, aims to enhance trading convenience in the bond market. However, the prevailing view is that this policy will be insufficient to reverse the current trend of rising bond yields.
The fundamental reasons for the current rise in bond yields are inflation concerns stemming from rising oil prices, coupled with aggressive bond issuance by big tech companies. Companies acquiring large quantities of memory for AI data center construction are issuing bonds, and these corporate bonds are trading at higher yields than government bonds, acting as a factor that hinders the decline in long-term yields. This situation is intensifying upward pressure on yields across the bond market.
Concerns are growing that the U.S. policy of continuously purchasing long-term bonds and selling short-term bonds could eventually exceed the U.S. government's capacity to manage interest payments. Such fiscal burden could lead to doubts about U.S. creditworthiness and potentially bring volatility to the dollar's value. Currently, this policy is often evaluated as a temporary fix, akin to 'peeing on a frozen foot' to solve immediate problems.
The current interest rate environment demands a shift in investment strategy. Analysis suggests a need to move away from past growth-stock focused investments and adjust portfolios toward stocks that can benefit from rising long-term bond yields. In particular, bank stocks and companies engaged in bond-related businesses may be favored in this environment. It is considered a time when interest-rate sensitive stocks should be considered over growth stocks as long-term yields reach certain levels.
The recent strength in the semiconductor market is attributed to the surge in artificial intelligence (AI) demand and increased data center investments. Effectively, continuous growth in AI demand is driving up semiconductor and NAND flash prices. Big tech companies are sustaining AI investments, as exemplified by the Qualcomm-Amazon contract, and Broadcom, in particular, demonstrated this trend with a 221% year-over-year increase in AI semiconductor revenue, reaching $16.7 billion last quarter. This directly translates into revenue for suppliers.
Sustained interest rate increases could pose a long-term burden on semiconductor companies. Higher corporate bond yields increase the cost for companies to issue bonds and raise capital for facility investments. With concerns about mortgage and corporate bond yields potentially reaching 7%, rising interest expenses could curb capital expenditures by semiconductor companies. This could burden the memory and semiconductor industries as a whole in the future.
Memory semiconductor demand shows a positive outlook until mid-2027. However, from a short-term perspective, there are pressures arising from interest rate hikes. Semiconductor companies may face difficulties in securing funding due to higher interest rates, which could affect facility investments. Therefore, there is a need to continuously monitor interest rate movements and respond to market changes.
The AI chip contract between Qualcomm and Amazon generated significant market anticipation, suggesting a cumulative payment potential of up to $60 billion. However, this should be understood not as a confirmed order, but as Amazon being granted the right to purchase Qualcomm shares, forming a symbiotic business relationship. In other words, it is not yet fully finalized. Qualcomm's exercise of stock purchase rights could lead to dilution of existing shareholders' stakes, necessitating close monitoring of future market reactions and business progress.
Qualcomm is pursuing a strategy to expand its influence beyond its traditional mobile-centric business into the big tech companies' data center industry. Collaboration with Amazon is considered a positive catalyst for this attempt at business transformation. Qualcomm's data center business scalability is expected to be concretely confirmed through the next earnings release, which will be a critical turning point for securing long-term growth momentum.
The artificial intelligence (AI) chip market is divided into training and inference chips, with different competitive dynamics. In the inference product sector, competition is intensifying with new rivals emerging against Nvidia. In contrast, Nvidia is expected to maintain a strong moat (barrier to entry) and continue its dominant position in the training chip sector. Nvidia's stronghold is anticipated to remain firm until 2028, but intensifying competition in the inference market could change the overall landscape of the AI chip market.
Concerns are being raised that the upcoming inflation indicators (PPI, CPI) may exceed expectations. Upward pressure on raw material prices, as shown in ISM indicators, suggests that inflation may remain high. Until the interest rate announcement, the market is expected to maintain a wait-and-see stance, and preparation for a downturn remains valid. Investors need to be mindful that market volatility could increase depending on the inflation indicator results and approach with caution.
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