Semiconductor stocks remain under pressure, with the leveraged semiconductor ETF making fresh lows after a recent rebound failed at a key resistance level. While technical indicators suggest the sector is becoming oversold and due for a potential bounce, sentiment has weakened significantly. $SOXL
The latest selling follows a sharp 10% decline in South Korea’s KOSPI index, reinforcing the recent pattern of U.S. semiconductor stocks taking their lead from Korean markets. The catalyst is growing concern over rising competition from China after memory chipmaker CXMT’s blockbuster IPO highlighted the country’s rapid progress in semiconductor manufacturing. Investors are also reassessing China’s efforts to develop advanced lithography equipment, although commercial alternatives to ASML’s technology are still considered some distance away. $ASML $MU
Markets are also becoming more cautious about AI-related circular financing, where suppliers help finance customer purchases. Such structures can boost reported sales but delay cash generation, drawing comparisons with practices seen before the 2000 technology crash.
Attention now shifts to the Federal Reserve, with policymakers beginning a two-day meeting ahead of tomorrow’s interest-rate decision. While recent economic data could justify higher rates, political pressure continues to favor lower borrowing costs, leaving room for a surprise.
On the geopolitical front, Oman has proposed a joint management framework for the Strait of Hormuz with Iran, a development that could ease tensions and improve the outlook for global energy markets if negotiations succeed. $QQQ $NVDA
