Juice

Is the AI-basket in the blender? US$440B was wiped out from U.S. stocks in a brutal Monday session. 

A semiconductor squeeze brought the Nasdaq down 1%, driven by declines in Nvidia ($NVDA), Broadcom ($AVGO) and Micron ($MU). The spillover into Asian markets wiped out nearly US$600B from South Korean, Chinese and Japanese indices.

Chinese chipmaker CXMT’s breakthrough progress in memory architecture weighed on the memory trade. Korea’s memory giants Samsung and SK Hynix ($SKHY) dragged the KOSPI into a sell-side sidecar (halting trade for five minutes).

There was also a strange moment of self-sabotage for chip stocks. Broadcom CEO Hock Tan warned that most AI investors have ‘no clue’ what they’re investing in ‘almost like a casino.’ As ZeroHedge pointed out, it’s a casino whose chips Broadcom’s own credit is paying for.

But if Meta’s ($META) outperformance is any indicator, there’s still some juice left in the AI trade…of the ‘Watermelon’ variety. Watermelon was the internal codename for Meta’s new frontier model family ‘Muse Wonder and Muse Wonder Full’, which comes with Active Memory and Active Focus features.

Meta extended its gains in Tuesday’s session as mixed earnings from major Wall Street banks didn’t do much for the market’s mood. JPMorgan ($JPM) reported a rare profit miss as Wells Fargo ($WFC) missed net interest income estimates. Citigroup ($C) and Goldman Sachs ($GS) lost 0.2% even as they topped profit estimates.

On a positive note, banks described U.S. consumer sentiment as resilient. Less positive was Bank of America ($BAC) getting hit with US$1.2B in fines for violating anti-money laundering laws, sending shares down 2% after-hours on Tuesday.

Elsewhere, investors pumped life into the sector most-correlated with the fuel pump. Energy stocks Marathon Petroleum ($MPC) and Valero Energy ($VLO) rallied as oil prices rose on the back of fears over supply disruption in Saudi Arabia. 

The mixed picture from banks and a souring chip trade might not be the freshest way to start earnings season. But the leading index is made up of over 500 ingredients, and next week the market will be looking at earnings from Netflix ($NFLX), Spotify ($SPOT) and Tesla ($TSLA). 

It could pack the punch that Wall Street needs to blend its way back into the green.

This is not financial advice nor a recommendation to invest in any of the securities listed. The information presented is for general information purposes only and intended to be of a factual nature only. Past performance and forecasts are not a reliable indicator of future performance. The value of your investments can go down as well as up and you may receive back less than your original investment. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.

Samy Sriram

Markets Analyst

Samy is a markets analyst at Stake, with seven years of experience in the world of investing, working across roles in private banking, venture capital and financial media. She has a Master’s degree in Finance and Data Analytics from The University of Sydney Business School.