US stocks dot gold, sell first and ask for confirmation? When is the time for chip stocks to plunge into a bear market?
U.S. stocks fell across the board this week, oil prices soared, and the market was uncertain about the profitability prospects of the artificial intelligence (AI) industry. The dual factors suppressed investor risk sentiment. The Philadelphia Semiconductor Index fell into a bear market. Investors were worried that the high growth in AI capital expenditures would be unsustainable. They sold chip stocks one after another, and the market started defensive trading. Google's financial report next week will be the top priority, and its performance guidance will trigger chain fluctuations in the entire technology industry chain. At the same time, changes in the situation in the Middle East may also bring uncertainty to the market.
U.S. stocks fell across the board this week, oil prices soared, and the market was uncertain about the profitability prospects of the artificial intelligence (AI) industry. The dual factors suppressed investor risk sentiment. The Philadelphia Semiconductor Index fell into a bear market. Investors were worried that the high growth in AI capital expenditures would be unsustainable. They sold chip stocks one after another, and the market started defensive trading. Google's financial report next week will be the top priority, and its performance guidance will trigger chain fluctuations in the entire technology industry chain. At the same time, changes in the situation in the Middle East may also bring uncertainty to the market. U.S. economy shows resilience A number of major economic data in the United States were released this week, with the core highlights being monthly inflation data (Consumer Price Index CPI, Producer Price Index PPI) and retail sales data. Inflation indicators slightly eased market concerns. In June, the overall CPI fell by 0.4% month-on-month and increased by 3.5% year-on-year. Market expectations were 3.8%. Core CPI fell by 0.2% month-on-month and increased by 2.6% year-on-year, which was less than the market estimate of 2.8%. The overall PPI fell 0.3% month-on-month, the largest decline since April 2025; it rose 5.5% year-on-year, down from 6.0% in May. Core PPI rose 0.2% month-on-month and 4.7% year-on-year, significantly lower than the market estimate of 5.2%. The University of Michigan's initial reading of consumer confidence in July rose to 54.4, a new high since February. The drop in gasoline prices has alleviated residents' price anxiety to a certain extent, but the confidence index is still down 12% from the same period last year. If gasoline prices continue to rebound, this round of improving confidence will be difficult to maintain. Respondents' one-year inflation expectations dropped to 4.2% from 4.6% in June; five-year long-term inflation expectations remained unchanged at 3.3%. Total retail sales in June rose 0.2% month-on-month, the lowest growth rate in the past five months. Excluding energy and food, core retail sales increased 0.5% month-on-month. Although the growth rate has slowed down from May, household consumption still shows resilience. The Atlanta Fed's GDPNow real-time forecast model raised its real-time estimate of second-quarter GDP growth to 1.7% from 1.3% last Friday. Bob Schwartz, a senior economist at Oxford Economics, said in an interview with China Business News: "Core retail sales in June were strong. Combined with the upward revision of data in previous months, real household consumption expenditures in the second quarter are expected to grow at an annualized rate of 2.5%. High oil prices have eroded residents' real incomes, which may subsequently slow down the growth of consumer spending. However, the labor market has stabilized, coupled with strong support from the appreciation of residents' financial assets, the overall resilience of consumer demand remains." Mid- and long-term U.S. bond yields fell, with the core driver being the breakdown of the U.S.-Iran ceasefire and the sharp rise in oil prices, which brought about safe-haven buying. The 2-year U.S. bond, which is closely related to interest rate expectations, fell about 5 basis points to 4.158%, and the benchmark 10-year U.S. bond fell more than 2 basis points to 4.545%. The probability of raising interest rates has been reduced across the board: the probability of raising interest rates at the September interest rate meeting has dropped from 86% to 60%; the time when the market fully priced in a 100% interest rate hike for the first time has been postponed from October to December. Deutsche Bank believes that the U.S. economic growth remains resilient and the labor market remains stable; inflation is sticky and rising price pressures are spreading. Although oil prices have fallen, geopolitical conflicts in the Middle East still pose upward risks to inflation. Therefore, the Federal Reserve still needs to raise interest rates to curb persistently high inflation. Schwartz told China Business News that the current risk of upward inflation remains high, while downward concerns in the job market have eased. As long as the labor market remains stable, if factors such as geopolitical conflicts, AI-induced demand, and tariffs continue to push up inflation, the Federal Reserve will support tightening monetary policy. At the same time, if inflation continues to cool, the Fed will tend to keep interest rates unchanged or cut them. As investors worried about overheating of AI-themed hype in the United States, technology stocks led the decline, and the three major stock indexes fell across the board. Sector performance was sharply divided. Dow Jones market statistics showed that the technology sector fell 3.8%, the communication services sector fell 2.4%, and the industrial and raw materials sectors each fell 1.4%; consumer discretionary goods and public utilities closed slightly lower. The defense and energy sectors bucked the trend and rose: the energy sector rose 5%, real estate rose 2.3%, consumer staples rose 1.4%, and the financial and medical sectors closed simultaneously.
It is worth mentioning that the Philadelphia Semiconductor Index plunged nearly 10%, the largest weekly decline in more than a year, and has plummeted by more than 18% since July. PrismML, an AI research and development organization, confirmed that Apple is evaluating its large model compression technology. With this solution, large models can be run directly locally on the terminal device, and the memory required can be reduced to up to one-fifteenth of the original. The decline in memory demand will trigger overcapacity of memory chips in advance, and the chip price decline cycle will come earlier than the market expected. U.S. stock storage manufacturers are collectively under pressure this week: SanDisk and Western Digital fell by more than 20%. Charles Schwab wrote in a market commentary that the violent fluctuations in the technology and semiconductor sectors are rooted in the sharp increase in market uncertainty about the main line of long-term growth of artificial intelligence, and multiple negative consequences have followed. On the other hand, the logic of using large models on the enterprise side has changed: in just a few months, enterprises have shifted from blindly pursuing "maximizing the number of token calls" to prioritizing "token usage efficiency." High computing power bills have resulted in a low input-output ratio, and companies have begun to control AI capital expenditures. At present, the actual impact of the above-mentioned events on the long-term revenue of cloud vendors and semiconductor companies cannot be quantified, but this week investors unanimously chose to "sell first, verify later." Next week's macroeconomic data schedule will be light, but it will usher in intensive financial report disclosures. The market currently predicts that the S&P 500's overall second-quarter net profit will increase by 23% year-on-year, and expectations are already at a high level. Google Alphabet's financial report on Wednesday is key to determining the trend of the AI sector, with a focus on capital expenditure guidance. Analysts expect the company's quarterly and full-year capital expenditures to rise significantly year-on-year (Alphabet has raised its full-year capital expenditure guidance for 2026 to a range of US$180-190 billion); whether the actual guidance is higher or lower than expected, it will trigger chain fluctuations in the entire technology industry chain. The agency believes that the Nasdaq 100 Index and the Philadelphia Semiconductor Index (SOX) have entered the oversold range, and there is a high probability of a mean repair market next week. Especially if Alphabet raises its capital expenditure guidance, the rebound momentum will be stronger. However, once the conflict between the United States and Iran escalates again, U.S. stocks will be under pressure regardless of the financial results. Taking into account the above factors, the overall market still needs to remain cautious. The current valuation has not fully digested the following major risks: AI investment returns are lower than expected and industry capital expenditures are shrinking; the conflict between the United States and Iran has pushed up crude oil prices; rising oil prices have once again pushed up inflation, forcing the Federal Reserve to maintain high interest rates. It is true that economic fundamentals and corporate earnings per share growth expectations are improving, and the spread of market conditions to many sectors is also a healthy signal. However, the current market obviously needs to deal with a large number of potential risk impacts.
It is worth mentioning that the Philadelphia Semiconductor Index plunged nearly 10%, the largest weekly decline in more than a year, and has plummeted by more than 18% since July. PrismML, an AI research and development organization, confirmed that Apple is evaluating its large model compression technology. With this solution, large models can be run directly locally on the terminal device, and the memory required can be reduced to up to one-fifteenth of the original. The decline in memory demand will trigger overcapacity of memory chips in advance, and the chip price decline cycle will come earlier than the market expected. U.S. stock storage manufacturers are collectively under pressure this week: SanDisk and Western Digital fell by more than 20%. Charles Schwab wrote in a market commentary that the violent fluctuations in the technology and semiconductor sectors are rooted in the sharp increase in market uncertainty about the main line of long-term growth of artificial intelligence, and multiple negative consequences have followed. On the other hand, the logic of using large models on the enterprise side has changed: in just a few months, enterprises have shifted from blindly pursuing "maximizing the number of token calls" to prioritizing "token usage efficiency." High computing power bills have resulted in a low input-output ratio, and companies have begun to control AI capital expenditures. At present, the actual impact of the above-mentioned events on the long-term revenue of cloud vendors and semiconductor companies cannot be quantified, but this week investors unanimously chose to "sell first, verify later." Next week's macroeconomic data schedule will be light, but it will usher in intensive financial report disclosures. The market currently predicts that the S&P 500's overall second-quarter net profit will increase by 23% year-on-year, and expectations are already at a high level. Google Alphabet's financial report on Wednesday is key to determining the trend of the AI sector, with a focus on capital expenditure guidance. Analysts expect the company's quarterly and full-year capital expenditures to rise significantly year-on-year (Alphabet has raised its full-year capital expenditure guidance for 2026 to a range of US$180-190 billion); whether the actual guidance is higher or lower than expected, it will trigger chain fluctuations in the entire technology industry chain. The agency believes that the Nasdaq 100 Index and the Philadelphia Semiconductor Index (SOX) have entered the oversold range, and there is a high probability of a mean repair market next week. Especially if Alphabet raises its capital expenditure guidance, the rebound momentum will be stronger. However, once the conflict between the United States and Iran escalates again, U.S. stocks will be under pressure regardless of the financial results. Taking into account the above factors, the overall market still needs to remain cautious. The current valuation has not fully digested the following major risks: AI investment returns are lower than expected and industry capital expenditures are shrinking; the conflict between the United States and Iran has pushed up crude oil prices; rising oil prices have once again pushed up inflation, forcing the Federal Reserve to maintain high interest rates. It is true that economic fundamentals and corporate earnings per share growth expectations are improving, and the spread of market conditions to many sectors is also a healthy signal. However, the current market obviously needs to deal with a large number of potential risk impacts.