[Good Morning Market] U.S. Rate and AI Bubble Concerns... Korean Stocks Expected to Open Lower

Even Nvidia's Strong Earnings Couldn't Prevent a Decline...
Broad Weakness in the New York Stock Market
"Despite Possible Corrections, AI Industry Growth Is Expected to Continue"

Amid expectations that the U.S. Federal Reserve will keep its benchmark interest rate unchanged and growing concerns about an artificial intelligence (AI) bubble, the New York stock market saw a broad decline. As a result, on November 21, the Korean stock market is also expected to open lower, led by declines in AI-related stocks such as semiconductors and electric power equipment.

On the 20th (local time), the blue-chip Dow Jones Industrial Average closed at 45,752.26, down 386.51 points (0.84%) from the previous session. The S&P 500, which tracks large-cap stocks, fell 103.4 points (1.56%) to 6,358.76, while the tech-heavy Nasdaq dropped 486.181 points (2.16%) to close at 22,078.048.

On the 20th (local time), the Dow Jones Industrial Average was displayed on the electronic board of the New York Stock Exchange after the market closed. Photo by Reuters Yonhap News

Although the market initially opened higher on the back of Nvidia's surprise earnings released the previous day, profit-taking in technology stocks intensified after stronger-than-expected employment data dampened hopes for a December rate cut. Nvidia's share price soared more than 5% early in the session but reversed course to close down 3.15%. AMD and Broadcom fell by 7.84% and 2.14%, respectively. Meanwhile, U.S. retail giant Walmart surged 6.46% on better-than-expected earnings and an upward revision of its annual outlook.

Lim Jeongeun, a researcher at KB Securities, said, "Nvidia's strong results seemed to ease concerns about AI overvaluation, but renewed bubble fears have triggered intensified selling in technology stocks." She added, "Questions about profitability have resurfaced, leading to increased volatility." She explained, "Federal Reserve Governor Lisa Cook's remarks that 'currently, the risk of overvaluation and sharp declines in various asset prices has increased' have heightened market anxiety."

Regarding the Korean stock market, Lee Sunghoon, a researcher at Kiwoom Securities, predicted, "Stocks related to AI, such as semiconductors and electric power equipment, which rose the previous day, are likely to give up their gains and start lower."

Lee also noted, "The won-dollar exchange rate has climbed back to the 1,470 won level, driven by strengthened expectations that the Fed will maintain its policy rate and by the weakness of the Japanese yen." He added, "In the short term, the direction of the exchange rate has become a more significant factor for foreign investor flows, so it is important to monitor whether the won's weakness will persist and how foreign capital will move."

Na Jeonghwan, a researcher at NH Investment & Securities, commented, "With diminished expectations for a rate cut and renewed debate over an AI bubble, U.S. semiconductor stocks have once again declined sharply." However, he assessed, "The repeated cycles of AI bubble concerns and their resolution are actually helping to prevent a collapse." He continued, "The investment case for the AI infrastructure industry remains intact. Even though there may be short-term corrections next year, the growth trend of the AI industry is expected to continue," he said, adding, "We maintain a buy perspective during corrections. It is also a time to pay attention to securities and holding companies in Korea that benefit from domestic policy momentum."