[Good Morning Market] US "AI Bubble" Concerns Resurface... KOSPI Expected to Open Lower

On November 7, the KOSPI is expected to open lower, influenced by concerns over an artificial intelligence (AI) bubble that emerged in the New York stock market.

On the previous day, the Dow Jones Industrial Average closed at 46,912.30, down 398.70 points (-0.84%) from the previous session. The S&P 500 Index ended at 6,720.32, down 75.97 points (-1.12%), while the tech-heavy Nasdaq Composite Index finished at 23,053.99, down 445.80 points (-1.90%).

The New York stock market declined as concerns over AI valuation burdens persisted, the October Challenger report showed a sharp increase in layoffs in the United States, and issues arose regarding government guarantees related to OpenAI. These factors dampened investor sentiment. Major AI-related stocks such as Nvidia (-3.65%), Palantir (-6.84%), and AMD (-7.27%) all plummeted.

According to the Challenger report released the previous day, the number of layoffs in the United States in October reached 153,000, a 183% surge compared to the previous month (54,000) and a 175% increase year-on-year. This marked the highest level since the fourth quarter of 2008 and fueled concerns about an economic slowdown.

The market showed mixed movements as the robust ADP private employment report for October (42,000, expected 25,000) contrasted with the Challenger report. In addition, a series of cautious remarks by Federal Reserve officials regarding interest rate cuts further lowered expectations for a rate cut at the December Federal Open Market Committee (FOMC) meeting.

Controversy over the overvaluation of AI technology stocks also contributed to market instability. Recently, after an OpenAI executive mentioned the possibility of government-backed chip procurement guarantees, the White House AI policy chief drew a line, stating that "there will be no bailout for specific companies." This reignited concerns about excessive investment burdens and a potential bubble in the AI industry.

Market participants believe that the resolution of the potential U.S. federal government shutdown, the release of the October Consumer Price Index (CPI) on November 13, and Nvidia's earnings announcement on November 19 will serve as short-term inflection points for the stock market.

In the domestic market, the KOSPI initially showed a technical rebound amid perceptions that the previous day's decline was excessive, but gains were erased as foreign investors continued to take profits, particularly in the electrical and electronics sectors. The KOSPI rose 0.55%, but the KOSDAQ fell 0.41%, once again dropping below the 900 mark. Notably, profit-taking was concentrated in theme stocks such as robotics, which had surged on expectations beyond their fundamentals.

Today, the domestic stock market is also expected to see limited upward momentum due to weakness in AI technology stocks and continued foreign selling. The won-dollar exchange rate approaching the 1,450 won level, which worsens conditions for foreign capital inflows, is also likely to be a burden.

However, Lee Sunghoon, a researcher at Kiwoom Securities, stated, "The government policy momentum that drove the stock market rally is likely to regain attention in November," and explained, "Key issues are expected to include discussions on the separate taxation of dividend income, which has a processing deadline of December 2, and the third amendment to the Commercial Act, which includes the mandatory retirement of treasury shares." He added, "Accordingly, the financial, holding company, and high-dividend sectors, which are expected to benefit from these policies, should be closely watched by the securities industry."