Market Overview: Chip Stock Selloff Drags US Stocks Lower
According to a Bloomberg report, US stocks ended the week lower, dragged by persistent weakness in chip stocks. Although the University of Michigan survey showed long-term inflation expectations below forecasts, easing some rate hike concerns, it failed to offset the selling pressure in chip stocks. Interactive Brokers chief strategist Steve Sosnick noted that the S&P 500 briefly turned positive intraday but gains quickly faded, similar to multiple failed rally attempts seen this week.
AI Valuation Concerns Spread from Asia to the US
AI valuation concerns spread from Asian markets to US trading. Two prominent Chinese hedge funds called AI stocks a bubble that could burst. Japan's SoftBank Group saw its shares fall after the New York Times reported that OpenAI may delay its IPO until 2027. South Korea's Kospi index triggered a trading halt for the second time this week due to sharp declines in chip stocks, though it partially recovered later.
Fund Flows and Institutional Views
In the US, Bank of America data showed that investors withdrew from US equities for the first time in three months, with outflows of $8.5 billion. Cameron Dawson, chief investment officer at Newedge Wealth, said a big question is whether the market has the patience to see returns on hyperscale cloud investments. Richard Reyle, CIO of Questar Capital Partners, stated he would not buy large-cap tech or AI stocks at current levels, as their dominance is waning, and he noted that the Mag 7 and Bitcoin peaked nine months ago and have not recovered.
Other Market Moves: Crude Oil Continues Decline
Meanwhile, crude oil prices extended their decline as tanker traffic through the Strait of Hormuz continued. Brian Jacobsen, chief economic strategist at Annex Wealth Management, said the highs for energy prices are in the past, and overall inflation has room to fall, but price pressure has not completely disappeared.