The US stock market has taken a sudden turn.
The US stock market was hit by another sharp sell-off overnight. After a brief rise in the three major indexes at the beginning of the session, they all plunged. The Nasdaq fell by nearly 1.5% at one point during the session, and the VIX fear index rose by 13% intraday.
Some analysts point out that investors are currently taking a deeper look at artificial intelligence. The fundamentals of the (AI) boom. In recent weeks, concerns about overvaluation of tech stocks have dominated the market.
Meanwhile, market expectations for a Federal Reserve rate cut are continuing to cool. According to CME's FedWatch Tool, as of press time, the probability of a 25 basis point rate cut by the Fed in December has fallen to 42.9%, after previously exceeding 70%. Nick Timiraos, known as the "Fed's mouthpiece," recently wrote that Fed officials are facing a major challenge—how to bridge internal disagreements on the interest rate path and make difficult judgments in the absence of new economic data.
US stocks plunge across the board
On November 17, Eastern Time, all three major U.S. stock indexes fell. By the close, the Dow Jones Industrial Average fell 1.18%, the S&P 500 fell 0.92%, and the Nasdaq Composite fell 0.84%.
Most major US tech stocks fell, with Nvidia among them. Apple fell 1.88%. Oracle fell 1.82%. Down 1.34%, Meta down 1.22%, Amazon Microsoft fell 0.78%. Down 0.53%; Tesla It rose by more than 1%.
Google shares surged over 3% against the market trend, hitting a new all-time high during the session. This surge was driven by news from Berkshire Hathaway, Warren Buffett's company, which released a holdings report showing that as of the end of the third quarter of this year, the company had accumulated a $4.3 billion stake in Google, making it Berkshire's tenth largest holding.
Most popular Chinese concept stocks fell, Nasdaq The China Golden Dragon Index closed down 1.21%, XPeng Motors Pony.ai plunges over 10% Li Auto shares plunged over 6%. NetEase fell more than 4%. Pinduoduo NIO Cars, Baidu Alibaba fell more than 1%; JD.com bucked the trend and rose more than 2%. It rose 0.72%.
Some analysts point out that although Wall Street expects Nvidia's earnings report, to be released after the market closes on Wednesday, to exceed expectations again, investors remain uneasy about the overvaluation of US AI-related companies.
Baird investment strategist Ross Mayfield warned that the market would react negatively if Nvidia gave even the slightest hint or forecast regarding chip demand.
Aberdeen Investments fund manager Xin-Yao Ng stated that tech stocks will likely experience a rollercoaster ride, oscillating between bullish and bearish trends for some time. Tech stocks and AI-related stocks are likely to continue offering optimistic outlooks in terms of forward guidance.
In addition, following the end of the US government shutdown, the market will be impacted by a series of US economic data releases this week, which will provide important clues for investors to assess the Federal Reserve's policy trajectory. The Fed will also release the minutes of its October 28-29 meeting, revealing rare disagreements among policymakers.
In his latest speech, Federal Reserve Governor Waller stated, "If we see a rebound in the job market, then we should ' insure '..." The need for a 'sexual interest rate cut' will decrease.
According to CME's FedWatch Tool, as of press time, the probability of the Federal Reserve cutting interest rates by 25 basis points in December is 42.9%, while the probability of keeping rates unchanged is 57.1%. The probability of the Fed cumulatively cutting rates by 25 basis points by January next year is 48.2%, the probability of keeping rates unchanged is 35.6%, and the probability of a cumulative rate cut of 50 basis points is 16.1%.
Goldman Sachs Emergency Warning
In its latest report, Goldman Sachs wrote that the US stock market may have already priced in most of the potential benefits from AI.
Goldman Sachs analysts say that, historically, during major technological innovation booms like AI, investors tend to over-concentrate and over-anticipate.
The report states: "Individual companies may achieve remarkable profit growth over a period of time. However, such growth may be appropriate for a particular company, but not for the market as a whole."
Goldman Sachs stated that when investors have high expectations for too many players in the AI supply chain, hoping they will all reap huge profits, it could mean overly high revenue and profit growth expectations.
Goldman Sachs analysts believe the main risk in the current US stock market is the assumption that early profits from the AI boom will continue. While AI technology can indeed boost corporate productivity in the early stages, these returns will typically erode over time due to industry competition and new investments.
Goldman Sachs released this report against the backdrop of heated debate in the US stock market surrounding an "AI bubble." Goldman Sachs analysts estimate that AI could generate approximately $8 trillion in additional revenue for US companies—although this revenue expectation has a wide range: potentially between $5 trillion and $19 trillion. The analysts did not set a timeframe for these increases.
Goldman Sachs stated in its report: "These benefits are sufficient to justify the current and anticipated levels of investment spending."
However, they added that since the launch of ChatGPT, the combined market capitalization of AI-related companies in the US stock market has increased by more than $19 trillion, suggesting that the US stock market may have already absorbed most of the potential upside for AI.
Goldman Sachs analysts added that while the market should have priced in the benefits of AI, current valuations are "significantly higher than the macroeconomic situation."
Goldman Sachs analysts believe that the current risk in the US stock market is that while such high valuations can be sustained during periods of strong economic growth, investors often end up paying the price once economic growth slows or the cycle turns.
JPMorgan Chase It has been previously warned that the biggest concern in the market regarding the current hot AI trading is that it may repeat the boom and bust of the dot-com bubble in the late 1990s.
"Relatively large sums of money have already been invested without a clear understanding of how the application curve will work. This seems to be the problem with AI development today," wrote a JPMorgan analyst.
(Source: Securities Times) (Times.com)
