[Good Morning Market] Semiconductor Stocks Rebound Amid AI Jitters... "Oversold Sectors Could Bounce Back"

U.S. stocks rebounded, led by artificial intelligence (AI)-related shares. Major AI companies' earnings supported investor sentiment amid a favorable macroeconomic environment, including lower international oil prices on hopes for negotiations between Russia and Ukraine and a pause in the rise in U.S. 10-year Treasury yields. However, concerns about the profitability of AI investments have not been fully resolved, and South Korean stocks are expected to remain volatile.

On Oct. 21 (local time), the Dow Jones Industrial Average closed at 52,856.09 on the New York Stock Exchange, up 0.69% from the previous trading day. The S&P 500 rose 0.58% to 7,757.17, and the Nasdaq Composite gained 1.05% to 26,702.86. The Philadelphia Semiconductor Index also advanced 1.97%.

Shares of AI-related companies rose, with Super Micro Computer gaining 9.6% and SpaceX climbing 7.8%, as strong earnings eased concerns about the AI industry. Nvidia rose 2.54%, while Micron gained 1.96%.

Han Ji-young, a researcher at Kiwoom Securities, said, "Although most AI stocks, including Micron, Sandisk and Nvidia, managed to rebound, the rebound was not strong, and CoreWeave, at the center of market concerns, weakened. This suggests that concerns about AI have yet to be resolved."

Results that could ease concerns over AI investment also came in. Meta's third-quarter revenue, announced after the market closed, was $64.6 billion, exceeding the market forecast of $63.4 billion. Earnings per share, excluding litigation costs, were also $7.40, above the forecast of $6.50. The midpoint of its fourth-quarter revenue guidance was $75 billion, surpassing the forecast of $73.9 billion. The upper end of its annual capital expenditure guidance was also kept unchanged.

Han said, "The core advertising business continues to grow rapidly, and the market potential of Muse, its agentic AI product, has been demonstrated as its user base has grown since its launch in September. This shows that the company can continue to prove its profitability even as the burden of large-scale investment increases."

However, high market expectations remain a variable. Despite reporting strong quarterly earnings, Lam Research fell more than 6% in after-hours trading after its guidance for the next quarter only slightly exceeded market expectations. Tesla also reported positive results, including a return to positive free cash flow and strong performance in its energy storage system (ESS) business, but its shares fell more than 2% after hours.

South Korean stocks rebounded after plunging the previous day. On Oct. 21, the KOSPI rose 3.29% to 5,735.66, while the KOSDAQ gained 1.38% to 792.76. AI infrastructure shares, including semiconductor and power equipment stocks, advanced on the back of Super Micro's stronger-than-expected revenue guidance and strong results from SpaceX's AI business.

Han said, "With both upside and downside factors from the U.S. market present, including a rise in Meta shares after hours and declines in Lam Research and Tesla shares after hours, the market is expected to remain volatile as it absorbs some profit-taking following the sharp short-term gains the previous day."

It is positive that foreign investors' buying in the market is improving, particularly in semiconductor stocks. The previous day, foreign investors were net buyers of Samsung Electronics for the fourth consecutive trading day, while they returned to net buying in SK hynix for the first time in 19 trading days.

Han said, "We believe foreign selling pressure on the KOSPI, particularly in semiconductor stocks, has eased compared with before. There is frequent debate over expanding actual demand for AI and the continuation of the investment cycle, on the one hand, and concerns about profitability and financing risks, on the other."

He added, "In the short term, the possibility of a further rebound in sectors that have fallen excessively should remain on the table. An alternative may be to broaden the scope of short-term investment beyond AI infrastructure stocks such as semiconductors to non-semiconductor sectors that have recently fallen relatively sharply, including defense, shipbuilding and cosmetics."

This content was produced with the assistance of AI translation services.