[New York Stock Exchange] Indexes Fall on 'AI Bubble' Fears... All Eyes on Nvidia Earnings, September Jobs Report

Caution Grows Ahead of Nvidia's Q3 Earnings on the 19th
Peter Thiel Sells Entire Nvidia Stake, Widening AI Bubble Concerns
FOMC Minutes Due on the 19th, Employment Report on the 20th
Alphabet Surges 3% on News of Warren Buffett's Investment

On November 17 (local time), all three major U.S. stock indexes closed lower. Investor sentiment weakened as caution grew over overheated investments in artificial intelligence (AI) ahead of Nvidia's earnings announcement. The market is closely watching Nvidia's upcoming earnings release this week, the minutes from the U.S. Federal Reserve's October Federal Open Market Committee (FOMC) meeting, and the September employment report, which had been delayed due to the federal government shutdown (temporary suspension of government operations).

On the 17th (local time), a trader is working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by Reuters Yonhap News

On this day, the Dow Jones Industrial Average, which tracks blue-chip stocks, closed at 46,590.24, down 557.24 points (1.18%) from the previous trading day. The S&P 500 index, focused on large-cap stocks, fell by 61.7 points (0.92%) to 6,672.41, while the technology-heavy Nasdaq index dropped by 192.511 points (0.84%) to 22,708.075.

Concerns about a bubble in AI-related stocks shook the overall market. It was revealed that Thiel Macro Fund, led by billionaire investor Peter Thiel, founder of PayPal and Palantir, sold all of its approximately 530,000 shares of Nvidia between July and September. Previously, Japan's SoftBank also sold its entire Nvidia stake worth 5.83 billion dollars (about 8.516 trillion won) last month. With news of these major investors exiting, anxiety spread that the AI investment cycle may have reached its peak.

'Bond King' Jeffrey Gundlach, CEO of DoubleLine Capital, also dampened investor sentiment by appearing on Bloomberg's 'Odd Lots' podcast and stating that current financial market asset prices are excessively overvalued. He also warned that the private lending sector, which is worth about 2,500 trillion won, could be the origin of the next major financial crisis.

This impacted technology stocks across the board. Nvidia, set to announce its third-quarter earnings on November 19, fell 1.88% as concerns over overheated AI investment and overvalued share prices intensified. Apple dropped 1.82%, and Microsoft fell 0.53%. Palantir and Oracle also declined by 1.59% and 1.34%, respectively. In contrast, Alphabet, Google's parent company, jumped 3.11% on news that Berkshire Hathaway, led by legendary investor Warren Buffett, had acquired a stake in the company.

Ross Mayfield, investment strategist at Baird, commented, "It is important to confirm that demand for Nvidia remains and is not slowing down. If they even slightly lower their chip demand outlook, the market will react negatively."

Dennis Polmer, Chief Investment Officer (CIO) at Montis Financial, noted, "It would not be surprising if Nvidia reports strong earnings and raises its outlook. However, this could further intensify concerns about endless AI capital expenditures."

The September non-farm payroll report, scheduled for release on November 20, is also drawing attention. The announcement of the September and October employment reports was delayed by the record-long 43-day government shutdown, and with the abrupt end of the shutdown on November 12, previously unreleased inflation and employment data are set to be released sequentially. However, as Kevin Hassett, Chairman of the White House National Economic Council (NEC), stated that the October unemployment rate will be permanently omitted due to incomplete data collection, concerns about the reliability of employment statistics are expected to persist.

The minutes from the October FOMC meeting, to be released on November 19, are also in focus. The Federal Reserve cut its benchmark interest rate by 0.25 percentage points twice in a row due to concerns over slowing employment, but at last month's meeting, two members respectively argued for holding rates steady and for a 0.5 percentage point cut, resulting in two dissenting votes. Additionally, Fed Governor Christopher Waller stated his support for a further 0.25 percentage point rate cut within the year, suggesting that internal debate within the Fed over the future path of interest rates will intensify.

Dennis Polmer, CIO of Montis Financial, said, "Since the FOMC is divided over the next steps, if the September employment report is stronger or weaker than expected, it could have a significant impact on expectations for a December rate cut. Now that the government has reopened, more time is needed to analyze economic indicators, making it more likely that the Fed will pause (rate cuts) in December."

Walmart's quarterly earnings report, a key indicator of consumer sentiment, will be released before the market opens on November 20.

U.S. Treasury yields are moving sideways. The yield on the 10-year U.S. Treasury note, the global benchmark for bond yields, fell by 1 basis point (1bp = 0.01 percentage point) from the previous day to 4.13%, while the yield on the 2-year Treasury note, which is sensitive to monetary policy, remained unchanged at 3.60%.