Stock Rotation Active Amid Falling Interest Rates

As interest rates fell, the supply and demand that had been concentrated in large-cap stocks, which had held up well even during the period of rising interest rates, began to spread to various other stocks.

In particular, strong rotation occurred, centered on data center and artificial intelligence (AI) related stocks, and the nuclear power sector also showed strength in the market.

SK Hynix saw an intraday decline of 6% to 7%.

This is attributed to the narrowing of the discrepancy with its ADR and the continued sell-off related to Intel and TSMC, while Western Digital and Seagate also fell sharply due to Toshiba issues.

This is the result of expectations of easing financial conditions being pre-reflected.

The strong dollar is interpreted as a sign that confidence in US policy has been secured. Bitcoin holding up in this situation is seen as evidence that interest rates are past their peak.

American Century assessed that a 10-year yield of 5.25% is an attractive entry point for long-term investors, and UBS diagnosed that the recent Treasury sell-off differs from past bubble situations.

The deepening fiscal and trade deficit burden acts as a negative factor, fueling rising interest rates.

Warnings suggest that economic dislocations could occur if this situation continues. Ray Dalio also mentioned the possibility of reduced US Treasury purchases, increasing market concerns.

The government's allowance of dyed diesel for highway use, G7 crude oil releases, and the recapture of Mocha port in the Red Sea by Yemeni government forces, easing geopolitical tensions, led to lower oil prices. Secretary of Energy Jennifer Granholm mentioned the possibility that diesel prices may have peaked weeks ago, given the declining trend in crude oil prices.

The government's authorization of dyed diesel for highway use, G7 efforts to release crude oil, and the recapture of Mocha port by Yemeni government forces are expected to ease geopolitical tensions and contribute to oil price stability.

Major AI companies like Deepseek and Moonshot AI raised significant funds ahead of their IPOs next year, boosting market expectations. OpenAI is also discussing investment with the UAE and BlackRock, indicating healthy capital flow across the AI industry.

Deepseek and Moonshot AI are also raising substantial funds in preparation for their IPOs next year, and AI agent infrastructure company Ampere also secured $15 million, indicating active capital liquidity across the AI industry.

The company plans to significantly increase CPU supply by 2027 and is actively working with TSMC to operate production facilities.

Wall Street analysts estimate AMD's total CPU sales to be $118 billion by 2027, anticipating high growth potential.

This is based on the outlook that Meta is a key customer for AMD's server business unit, and that AI agents require several times more computing resources than traditional chatbots.

Therefore, it is analyzed that the expectation of AI agent proliferation leading to a surge in CPU demand is reflected.

The increase in electricity demand has led to a decrease in coal-fired power generation and an expansion of renewable energy. The US Energy Information Administration (EIA) forecasts that electricity consumption will reach an all-time high this year due to increased operation of AI and cryptocurrency data centers.

As a result, power equipment and energy companies are rising together, and cooling and air conditioning companies such as Comfort Systems also rebounded by 6%.

Vistra's stock also surged 10% on news of a $4.2 billion loan support from the US Department of Energy.

This includes the upgrade of 11 reactors, with a $4.3 billion investment planned. Vistra surged 10% on news of a $4.2 billion loan support from the US Department of Energy.

The impact of exchange rates, along with triple volatility including the semiconductor ETF rebalancing scheduled for October 8, option expiry, and the end of share buybacks, are analyzed to exert short-term selling pressure on Samsung Electronics' stock. Consequently, Goldman Sachs revised its Q3 operating profit forecast for Samsung Electronics down by 5% from the original 112 trillion won to 106 trillion won.

Exchange rate fluctuations were cited as the primary reason, and a warning was issued that on October 8, three volatilities—semiconductor ETF rebalancing, option expiry, and the end of share buybacks—could occur simultaneously.

These volatilities are likely to act as short-term selling pressure on Samsung Electronics' stock.

If interest rates remain high, a positive supply and demand narrative for large-cap stocks is expected to continue. Conversely, if interest rates fall sharply, supply and demand volatility could expand in conjunction with option expiry, so market attention is focused on the 10-year Treasury auction results to be announced early morning and the direction of interest rates.

If interest rates remain at a high level, there is a strong possibility that a positive narrative for large-cap stocks will continue, but if interest rates fall sharply, supply and demand volatility could expand in conjunction with option expiry.

When interest rates fall, small and medium-sized stocks tend to move, which is interpreted as the market's expectation that the peak of interest rates has passed.

Planet Labs surged 7% and AST SpaceMobile rebounded 8%, and Berkshire Hathaway's purchase of construction stock Lennar also raised expectations for a spread of capital into value stocks.

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