[Good Morning Market] Bargain Hunting in US Stocks Despite AI Bubble Concerns... Korean Market Also Worth Watching

Profit-Taking Hits US Tech Stocks,
Intraday Losses Mostly Recovered
Hopes for a Rebound in Volatile Korean Market This Week

The New York Stock Exchange showed mixed results for the third consecutive day, affected by a broad decline in technology stocks. As concerns about a potential bubble in the artificial intelligence (AI) industry emerged, investors engaged in profit-taking, particularly among large-cap tech stocks.

On the 20th (local time), the S&P 500 index closed at 6,395.78, down 0.24% from the previous day, while the tech-heavy Nasdaq index fell 0.67% to 21,172.86. Only the Dow Jones Industrial Average finished higher, rising 0.04% to 44,938.31 at the end of regular trading.

Again on this day, heavy selling in AI and semiconductor-related stocks continued right after the opening, causing the Nasdaq to widen its intraday losses to as much as 1.92%. The Philadelphia Semiconductor Index also dropped by as much as 3.38% at one point during the session compared to the previous day.

The weakening momentum in AI and semiconductor-related stocks, along with evaluations that their prices have risen excessively relative to earnings, are seen as increasing downward pressure. Some also believe that a recently published report by the Massachusetts Institute of Technology (MIT) had a negative impact.

The NANDA Initiative at MIT claimed in a report released this week that only about 5% of companies that adopted generative AI saw accelerated revenue growth, while the remaining 95% did not experience significant benefits.

However, as the Nasdaq continued to fluctuate, bargain hunting also emerged. Nvidia, the leading AI stock, dropped as much as 3.89% during the session but recovered most of its losses to close down just 0.24% from the previous day.

The hawkish (monetary tightening) tone reflected in the minutes of the July US Federal Open Market Committee (FOMC) meeting also weighed on the market. According to the minutes released that day, only two members expressed a minority opinion in favor of a rate cut at last month's FOMC meeting. Overall, there was a prevailing concern about inflation. As expectations for a majority supporting rate cuts diminished, this delivered a blow to stock prices.

The domestic stock market, which has been volatile throughout the week, is also expected to be affected by the decline in the US market. Negative factors such as the contract between Korea Hydro & Nuclear Power and Westinghouse in the US, and issues related to tax reforms like the major shareholder transfer income tax, still remain. The MSCI Korea ETF, which tends to move in line with the domestic market, fell 0.11%. The Philadelphia Semiconductor Index dropped 0.72%.

However, as leading stocks in nuclear power, shipbuilding, and banking, which had plummeted during the previous session, recovered their losses, there appears to be some demand waiting to buy at lower prices. Han Ji-young, a researcher at Kiwoom Securities, explained, "There is still a possibility that the government may shift its policies to resolve market turmoil," adding, "Since the domestic stock market is currently in a short-term oversold phase, there could be a rebound centered on leading stocks that have fallen excessively."

Yonhap News

This content was produced with the assistance of AI translation services.