[Good Morning Market] KOSPI Expected to Open Lower as US AI and Semiconductor Stocks Weaken Together

Amid ongoing concerns about an artificial intelligence (AI) bubble, all three major indices on the New York Stock Exchange closed lower. Investor sentiment was further dampened as expectations for a Federal Reserve (Fed) interest rate cut diminished. The domestic stock market is also expected to open lower as a result of these factors.

On November 17 (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 46,590.24, down 557.24 points (1.18%) from the previous session. The S&P 500 fell by 61.7 points (0.92%) to 6,672.41, while the Nasdaq dropped 192.51 points (0.84%) to close at 22,708.07.

The New York stock market showed caution amid the AI bubble debate, with investors awaiting Nvidia’s third-quarter earnings on the 19th and the U.S. September employment report scheduled for release on the 20th.

Nvidia declined by 1.88%, Oracle by 1.34%, AMD by 2.55%, and both Microsoft and Amazon fell by 0.53% and 0.78%, respectively. Apple dropped 1.82% amid rumors of CEO Tim Cook’s early retirement. Among major big tech companies, only Google (Alphabet) and Tesla managed to post gains for the day.

Han Ji-young, a researcher at Kiwoom Securities, commented, “According to the recently released 13F filings, which show institutional investors’ portfolios for the third quarter, most institutions have been reducing their holdings in AI-related stocks, including Nvidia. At the same time, the fact that Amazon’s first-ever $15 billion corporate bond was a success in terms of demand suggests that the AI growth story still holds weight.”

The possibility of a Fed rate cut in December also remains uncertain. According to CME’s FedWatch, as of the 17th, the interest rate futures market reflected a 45% probability that the Fed would cut rates at the December Federal Open Market Committee (FOMC) meeting, and a 55% probability that rates would remain unchanged. The shrinking likelihood of an additional rate cut within the year is seen as a negative factor for technology stocks.

As a result of these developments, the domestic stock market is expected to open lower on the 18th.

One analyst explained, “At the index level, we are likely to see a reversal of the previous day’s gains, but at the sector level, differentiated trends will emerge depending on individual issues and the extent of previous price declines.”

The analyst continued, “With earnings season now over, the direction of the stock market will be driven by U.S.-related factors such as macroeconomic issues (Fed officials’ remarks, employment data, etc.) and Nvidia’s earnings for the time being. While we may face increased volatility as we have recently experienced, it is advisable to prioritize other strategies over excessively increasing cash holdings.”

He added, “It is appropriate to respond with gradual buying, focusing on sectors that have underperformed the KOSPI within industries with upward earnings consensus revisions since November, such as shipbuilding, display, securities, and machinery.”