The latest volatility in tech stocks enters its second day, with South Korean chipmakers becoming the main targets of selling pressure on Thursday. Meanwhile, the dollar weakened and U.S. Treasury yields fluctuated ahead of the crucial June non-farm payrolls report, data that could either support or challenge market expectations for Federal Reserve rate cuts this year.
As of writing, Dow futures were up 0.18%, S&P 500 futures gained 0.15%, and Nasdaq futures advanced 0.25%. In pre-market trading, Micron Technology (MU) fell 3%, and ARM Holdings (ARM) dropped 3.6%.
In Europe, the Stoxx 600 index rose 0.5%, with the technology sector being one of only two among its 20 industry groups to decline.
Asian AI Chip Stocks Plummet
Memory chipmakers SK Hynix and Samsung Electronics saw a combined market value wipeout of $290 billion, driving South Korea's KOSPI index down sharply by 7.9%. This followed a 68% surge in the index during the second quarter, fueled by soaring demand for AI-related memory chips. SK Hynix plunged 14%, while Samsung Electronics fell 9%.
This decline followed a 6% drop in U.S. chip stocks on Wednesday, although they had still posted an 87% cumulative gain for Q2.
IG market analyst Fabien Yip stated, "The sharp decline in Asian chip stocks today is more of a spillover effect from Wall Street." He added that profit-taking appeared to be a key driver.
He further noted, "An additional factor is reports that Apple is approaching restricted Chinese memory manufacturers to source chips for devices in the Chinese market, posing a pricing threat to existing players in South Korea and Japan."
There may also be some portfolio rebalancing at play, with investors adjusting positions at the start of the new quarter.
Chip Stocks Await a Catalyst
As traders remain highly sensitive to any signals, one of the market's biggest drivers is experiencing frequent swings: chipmakers, previously parabolic winners from massive AI infrastructure spending, are now facing concerns that the rally may have gone too far.
The latest trigger was a report that Meta Platforms (META) plans to sell computing capacity, raising questions about potential oversupply in AI compute power.
Concurrently, as money markets scale back bets on tighter monetary policy, investors are rotating into sectors that benefit from an improving economic outlook but had previously lagged.
On Thursday, European consumer-related stocks led gains, extending a trend from the U.S. market on Wednesday when most S&P 500 components rose. In contrast, U.S. pre-market trading saw memory, storage, and processor-related stocks again among the biggest decliners.
MPPM trading head Guillermo Hernández Sampere said, "The market is becoming aware of the risk that the tech sector may be overvalued."
He added, "Whether the market is making a significant exit from tech will become clearer with the next round of quarterly earnings."
Non-Farm Payrolls Report Looms
Investors are also focused on the key U.S. jobs report, arriving early due to the holiday-shortened week. This data will provide fresh clues on the interest rate path following comments from Fed Chair Kevin Warsh on Wednesday, which tempered market speculation about rate cuts this year.
Bloomberg Economics expects U.S. non-farm payrolls for June to have grown at a robust pace, potentially exceeding May's strong gains. Hiring growth is expected to be particularly strong in leisure and hospitality, boosted by the World Cup, while government employment may have seen its fastest growth this year.
A Reuters poll shows economists forecast 110,000 new jobs added in June. However, the forecast range is wide, from 25,000 to 200,000, suggesting a high potential for a surprise. The unemployment rate is expected to hold steady at 4.3%.
Given recent data pointing to a strengthening labor market, giving the Fed room to focus more on its inflation target, traders anticipate the latest jobs data may have a limited market impact.
However, a weaker-than-expected report could prompt markets to further scale back bets on Fed tightening, especially with energy prices declining.
Money market pricing currently indicates expectations for one Fed rate cut by October, with about a 40% probability of a second cut by year-end.
Singular Bank chief strategist Roberto Scholtes said, "The market is still pricing in at least one Fed rate cut in the coming months, which seems somewhat inconsistent."
He added, "If non-farm payrolls come in below 100,000, it could be a catalyst for the market to partially unwind those rate cut expectations."
Dollar Weakens
The dollar edged lower ahead of the U.S. jobs report. Commerzbank's Volkmar Baur noted in a report that with the U.S. and Iran signing a memorandum of understanding to end the war in June, the U.S. labor market has become more significant for forex markets.
However, he believes the data's importance will be less than in the past, as new Fed Chair Kevin Warsh has not focused heavily on the labor market, and recent jobs data appears more volatile.
Yen Suddenly Surges
In early European trading Thursday, the Japanese yen suddenly strengthened sharply against the dollar, with USD/JPY falling 0.9% to 161.15, on growing speculation that persistent yen weakness could prompt a new round of intervention from Japan.
It remains unclear what specifically drove the move, but analysts noted it was relatively mild compared to volatility following previous Japanese interventions.
Kansai Mirai Bank strategist Takeshi Ishida said, "If this was caused by intervention, the scale is small. The Japanese government may have stepped in early ahead of potentially strong U.S. jobs data. I originally thought they would act if the yen fell to the 163-164 level."
He added, "Intervention would be more effective if U.S. jobs data is weak, as it would then be harder for the Fed to justify a rate cut."
U.S. Treasury Yields Rise Across the Curve
In bond markets, U.S. Treasury yields rose across the curve as economic data remains resilient. Market focus on Thursday centers on the June jobs data. The 10-year U.S. Treasury yield rose 1.8 basis points to 4.492%.
SEB's Karl Steiner said in a report, "If the outcome is close to expectations—noting that the past three months' data have all surprised to the upside—it would mean the Fed can continue prioritizing its inflation target over its employment goal."
The head of analysis added that, concurrently, inflation is expected to remain on a downward path as long as the Iran conflict continues to de-escalate without significant second-round effects.
Eurozone government bond yields rose, tracking higher U.S. Treasury yields. The 10-year German Bund yield increased 2.2 basis points to 2.898%. Spain and France are scheduled to issue bonds on Thursday.
KBC Bank analysts noted in a report that the highly anticipated central bank governors' panel at the Sintra ECB Forum on Wednesday did not truly offer new insights into the short-term monetary policy dynamics of the respective central banks.
The discussion featured Fed Chair Kevin Warsh, ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem.
Oil Under Pressure, Gold Rebounds
Brent crude fell 1.4% to $70.50 per barrel, extending losses and retreating to pre-war levels. Oil prices remain under pressure as crude flow through the Strait of Hormuz increases and traders digest signs of oversupply.
A Qatari foreign ministry spokesperson stated on platform X that Qatari and Pakistani mediators have held separate meetings with U.S. and Iranian negotiators in Doha and made positive progress on issues related to the memorandum of understanding.
MUFG's Soojin Kim said, "Oil may continue to face downward pressure as supply normalizes and geopolitical risk premiums fade. However, setbacks in negotiations or new security incidents could still trigger periodic volatility."
SoftBank Targets U.S. AI Cloud Market with 10GW Ambition! Masayoshi Son Also Seeks to Monetize Idle GPUs
Amid market concerns about AI compute oversupply triggered by reports that Meta Platforms (META) plans to lease/sell idle AI compute infrastructure—a development that hammered the AI infrastructure investment theme and triggered a global tech stock sell-off—SoftBank Group and its telecom unit are set to begin leasing their large-scale AI compute infrastructure resources to U.S. companies starting next fiscal year. The move aims to leverage the company's expanding AI data center project pipeline for a stronger profit path.
Undeterred by 'AI Compute Oversupply' Fears, SK Hynix Plans 100 Trillion Won Investment for NAND and Advanced Packaging Plants
SK Hynix stated on Thursday it plans to invest 80 trillion won (approximately $514.6 billion) to build a new NAND flash wafer plant in Cheongju, South Chungcheong Province, to address chip shortages driven by the AI boom.
The plant, named M17, is scheduled to begin operations in 2029. SK Hynix also plans to invest an additional 20 trillion won by the end of 2027 to build a chip packaging plant in Cheongju.
Gold rebounded 1.4% to $4,078 after falling 14% in the second quarter.
MUFG analysts said, "Gold could find support in the near term if market expectations for further rate cuts continue to cool. However, persistent inflation and a resilient U.S. economy may limit its upside."
Meta's 'Selling Compute' Comment Hammers AI Hardware! Wall Street Rushes to Analyze: Don't Panic, This Isn't Compute Oversupply, Nor an Industry Inflection Point
Earlier news about Meta selling excess compute capacity indicated the company is developing cloud business plans, potentially offering two types of services: one is hosted model/API access, similar to AWS Bedrock; the other is 'raw compute' rental, similar to Neocloud.
Following the news, shares of next-generation GPU cloud service provider CoreWeave fell 13%, Nebius dropped 15%, and AI hardware sectors like chips were subsequently hit hard.
In response, Wall Street firms including UBS, Morgan Stanley, and Bernstein quickly analyzed the event. This may not signal a collapse in AI fundamentals but rather a pragmatic move by a giant to balance compute constraints with financial returns. This cannot be simply equated to "Meta doesn't need compute anymore." However, the implications differ for various assets.
Stocks in Focus
Alphabet (GOOGL) shares fell 1%. The decline followed a European antitrust court upholding a 4.1 billion euro ($4.67 billion) fine against its subsidiary Google, a penalty stemming from a 2018 European Commission decision that found Google used its Android system to give its own apps an unfair competitive advantage.
Bending Spoons, which debuted on the public market Wednesday with shares surging nearly 40% above its IPO price, retreated 7%.
Defense technology firm AeroVironment (AVAV) rose 4% after securing a $500 million U.S. Army contract for counter-drone equipment development.
Palantir Technologies (PLTR) surged over 3% after Davidson upgraded the stock from Neutral to Buy. The firm's analyst stated the stock's valuation is at an attractive level in recent years. In the holiday-shortened trading week, the stock is on track for a cumulative gain exceeding 15%.
Bitcoin's price broke above $61,000, with a two-day gain of 4.5%, boosting crypto-related stocks: crypto asset reserve firm Strategy (MSTR) rose 6%, and crypto exchange Coinbase Global (COIN) gained over 3%.
Robinhood (HOOD) shares advanced, supported not only by stronger Bitcoin but also by Mizuho raising its price target to $130. Analysts believe Robinhood has the potential to grow into a mega-scale platform in the online brokerage space, with a chance to achieve a dominant position across markets rather than being confined to a single country.
Following a sharp pullback on Wednesday, memory-related stocks declined again on Thursday as investors took profits at the start of Q2. Sandisk fell over 10% on Wednesday and was down another 3.5% in pre-market trading Thursday. Western Digital (WDC) and Seagate Technology fell 6% and 5% respectively on Wednesday, and each declined another 2.5% on Thursday.
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