[New York Market Briefing] Rate cut hopes dim and AI bubble concerns spread…US three major indexes 'down'

With concerns about an artificial intelligence (AI) bubble persisting, the three major New York stock indices all fell. The diminished expectation of a rate cut by the U.S. central bank (the Fed) also weighed on investor sentiment.

On the 17th (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 index closed at 6,672.41, down 61.7 points (0.92%), and the Nasdaq closed at 22,708.07, down 192.51 points (0.84%).

By sector, financials (-1.93%), energy (-1.88%), materials (-1.53%), technology (-1.43%) and industrials (-1.03%) lagged. In contrast, communication (1.13%) and utilities (0.84%) showed strength.

Voices that AI tech stocks are overvalued have not stopped. Thiel Macro, the hedge fund run by Peter Thiel, sold all of its NVIDIA shares worth $94 million (about 137.5 billion won) that it held last quarter. Following SoftBank, institutional investors have recently been selling NVIDIA heavily.

NVIDIA is due to announce third-quarter results. If results and guidance fall short of expectations, investor sentiment is likely to freeze. Ross Mayfield, an investment strategist at Baird, said, "It is important to confirm that demand for NVIDIA's (AI products) is solid and showing no signs of slowing," adding, "the second question is what kind of return on investment (ROI) companies buying massive amounts of chips are actually getting."

The possibility of a Fed rate cut in December is also uncertain. According to the CME's FedWatch, as of the 17th the rate futures market priced in a 45% chance that the Fed would cut rates at the December FOMC and a 55% chance of no change.

The shrinking possibility of additional rate cuts this year is seen as a negative for tech stocks. Fed Vice Chair Philip Jefferson said that policy changes "need to proceed slowly."

Dennis Palmer, CIO of Montis Financial, explained, "This week will bring more clarity with NVIDIA's results and the delayed September jobs report, but these events could further spur volatility."

Looking at individual stocks, Alphabet, Google's parent company, rose 3.11% on news that Berkshire Hathaway held $4.33 billion worth of Alphabet shares as of the end of September (about KRW 6.3 trillion).

By contrast, NVIDIA (-1.88%), Oracle (-1.34%), Palantir (-1.59%), and AMD (-2.55%) were weak.

Apple's stock fell 1.82% on news that CEO Tim Cook could step down as early as next year. Amazon's stock fell 0.78% after it said it plans to issue $15 billion in corporate bonds (about KRW 22 trillion). The Philadelphia Semiconductor Index, composed of AI and semiconductor-related stocks, closed down 1.55%.

The CBOE Volatility Index (VIX) rose 2.55 points (12.86%) from the previous session to 22.38.

Jin Young-gi, Hankyung.com reporter young71@hankyung.com