[New York Stock Market Briefing] AI bubble concerns persist…Three major indices fall for a second straight day

The three major stock indices of the New York stock market fell for a second straight day. The remarks by the U.S. central bank (Fed) chair that "the market seems fairly overvalued" left an aftereffect, and large investments by NVIDIA and OpenAI have not dispelled suspicions of an "artificial intelligence (AI) bubble."

On the 24th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 46,121.28, down 171.50 points (0.37%) from the previous close. The Standard & Poor's (S&P) 500 index closed at 6,637.97, down 18.95 points (0.28%) from the previous close, and the Nasdaq Composite Index closed at 22,497.86, down 75.62 points (0.33%).

The major indices in New York have been weak for two consecutive days. With the market already widely perceived as overvalued, Powell's remark the day before that "it seems fairly overvalued" provided a pretext for a correction. The S&P 500 fell 0.8% over two days, and the Nasdaq fell more than 1%.

Along with perceptions of stretched stock valuations, doubts persist about whether the AI industry is in a bubble. The $100 billion supply contract between NVIDIA and OpenAI has been pointed out as effectively a 'circular investment' structure, which has strengthened risk-averse sentiment.

The deal between NVIDIA and OpenAI involves NVIDIA providing funding to OpenAI, and when OpenAI generates revenue it would use that money to purchase NVIDIA chips. Wall Street points out that this is similar to cases during the dot-com bubble when some telecom equipment companies funded specific firms to maintain sales, and those firms used the funds to buy equipment. Such 'shuffling' is warned to appear before a bubble collapses.

Among mega tech companies with market capitalizations over $1 trillion, NVIDIA, Apple, Amazon, and Alphabet fell around 1%. By contrast, Tesla rose 4%.

China's largest e-commerce company Alibaba said it would increase AI investment more than expected, sending its stock up nearly 9%.

Micron, despite reporting solid results, fell nearly 3% amid AI bubble concerns.

Min-kyung Shin, Hankyung.com reporter radio@hankyung.com