Chip Stocks Drag Wall Street Lower; Inflation Data Fails to Boost Confidence
According to Bloomberg, US stocks closed lower for the week, dragged down by persistent weakness in chip stocks. The University of Michigan survey showed long-term inflation expectations coming in below expectations, which eased some rate hike concerns, but was not enough to offset the selling pressure in chip stocks. Steve Sosnick, chief strategist at Interactive Brokers, noted that the S&P 500 briefly turned positive intraday but the gains quickly faded, mirroring the failed rebound attempts seen multiple times this week.
AI Valuation Fears Spread from Asia to the US
AI valuation fears spread from Asian markets to US trading. Two well-known Chinese hedge funds publicly stated that AI stocks are in a bubble that could burst. Shares of Japan's SoftBank Group fell after The New York Times reported that OpenAI might delay its IPO until 2027. South Korea's Kospi index triggered a trading halt for the second time this week due to a sharp drop in chip stocks, before partially recovering.
Massive Capital Outflows from US Stocks; Institutions Warn Tech Stocks and Bitcoin Have Peaked
On the US side, Bank of America data showed that investors withdrew from US equities for the first time in three months, with outflows reaching $8.5 billion. Cameron Dawson, chief investment officer at Newedge Wealth, commented that whether the market has the patience to wait for returns on hyperscale cloud investments is a big question. Richard Reyle, chief investment officer at Questar Capital Partners, stated that he would not buy large-cap tech or AI stocks at current levels, as their dominance is waning, and Mag7 and Bitcoin peaked nine months ago and have not recovered.
Crude Oil Prices Extend Decline; Limited Room for Disinflation
Meanwhile, crude oil prices continued to decline as tanker traffic through the Strait of Hormuz remained steady. Brian Jacobsen, chief economic strategist at Annex Wealth Management, said that energy prices have passed their peak, and there is room for headline inflation to decline, but price pressures have not completely disappeared.