The Zhitong Finance App learned that the trend of US stocks diverged in early Friday trading. Federal Reserve Chairman Walsh's latest speech strengthened the market's expectations that the Federal Reserve will keep interest rates unchanged in October, providing some support for US stocks. However, concerns surrounding the sustainability of the artificial intelligence (AI) investment boom continue to ferment, dragging down the performance of technology stocks. The NASDAQ 100 index is expected to record a decline of more than 3.5% this week, ending the previous four-week continuous upward trend. As of press release, the S&P 500 index rose slightly by 0.03%, while the Nasdaq 100 index fell by 0.52%.
Earlier, Walsh delivered a speech during the International Monetary Fund (IMF) annual meeting. Traders maintained their expectations that the Federal Reserve would keep interest rates unchanged at the end of this month. Affected by this, the market quickly lowered its bets on the Federal Reserve's interest rate hike in October. According to the data, before Walsh's speech, traders expected the probability that the Fed would raise interest rates at the October 27-28 monetary policy meeting was about 27%, but after the speech, this probability fell below 15%.
Andrew Tyler, head of global market intelligence at J.P. Morgan Chase, said that Walsh's speech further strengthened the market's expectations that the Federal Reserve will stay on hold in October. The bank is still focusing on selective diff buying opportunities.
Despite easing interest rate expectations, the overall performance of US stocks this week is still weak. As of early Friday trading, the S&P 500 index had a cumulative decline of about 0.8% this week, and recorded gains in two of the previous three weeks. The cumulative decline of the Nasdaq 100 index this week was more than 3.5%, which is expected to end the previous four-week streak of gains. However, the S&P 500 index is currently only about 1% from the historic closing high set on October 6, indicating that despite the recent increase in market volatility, US stocks as a whole are still relatively high.
One of the main reasons technology stocks have come under pressure recently is that investors are beginning to re-examine the sustainability of the AI infrastructure investment boom. AI cloud computing service provider Coreweave (CRWV.US) recently suffered a double loss in equity bonds, raising market concerns about the financing capacity, debt burden, and long-term profit models of emerging AI cloud computing companies. In early Friday trading, CoreWeave's stock price fell by more than 6.5% again, and the cumulative decline this week is expected to exceed 20%.
Dell Technologies (DELL.US) also continued to weaken, falling more than 1% in early Friday trading. Over the previous two trading days, the stock plummeted 17% and became one of the worst performing constituent stocks in the S&P 500 index on Thursday.
The overall performance of the chip sector is sluggish. iShares Semiconductor ETF (SOXX.US), which tracks semiconductor companies, fell more than 1% in early Friday trading and is expected to close for the ninth consecutive trading day. Storage-related businesses have been hit even more clearly. Seagate (STX.US) fell more than 4%, and Western Digital (WDC.US) fell more than 3%.
The market is concerned that as AI data center construction continues to consume huge amounts of capital, whether related companies can maintain the previously rapidly growing capital expenditure scale in the future, and whether these investments can generate sufficient commercial returns.
At the same time, global bond yields are still hovering near their highest level in the past 20 years, further increasing the financing costs of AI infrastructure construction. For technology companies that rely on long-term growth expectations to support their valuations, keeping interest rates high also means that the discounted value of future profits may be under greater pressure.
Despite the sell-off in AI-related stocks, other big tech companies performed relatively well in early Friday trading. Tesla (TSLA.US) rose 0.5%, Apple (AAPL.US) rose 0.77%, and Microsoft (MSFT.US) also rose slightly. This differentiation reflects that investors are not completely leaving the technology sector, but are paying more attention to the profitability, capital expenditure pressure, and valuation levels of different companies.
As Federal Reserve officials are about to enter a regular period of silence before the monetary policy meeting this weekend, the market will lack new official policy guidance. Investors will continue to evaluate the impact of inflationary pressure, changes in bond yields, and AI investment risks on the stock market until the Federal Reserve announces its interest rate decision on October 28. Currently, an important question facing the market is, after the S&P 500 index hit a record high on October 6, what other factors can push US stocks to rise further.
Although inflation and interest rate risks continue to plague Wall Street, the profit performance of US companies is still an important factor supporting the stock market.
As the third quarter earnings season officially enters the intensive disclosure phase this week, the results announced by several companies show that the overall profitability of US companies is still resilient. Among them, Alcoa (AA.US) rose more than 7% in early Friday trading. The company announced adjusted earnings for the third quarter that exceeded market expectations, mainly benefiting from increased aluminum production and rising product prices.
Strong corporate profits offset the pressure brought about by high inflation, rising financing costs, and AI investment concerns to a certain extent, keeping major US stock indices relatively stable amid recent market fluctuations.
However, as AI-related companies' stock prices continue to be adjusted, investors' requirements for future growth prospects are increasing. The focus of the market is no longer just on whether AI capital expenditure can continue to expand, but whether related investments can actually be converted into sustainable revenue and profits.