Asian Semiconductor Stocks Surge as AI Capex Drives Market Gains
Market Overview and Key Drivers
August 5 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole.
Asian Semiconductor Rally
Asian markets have followed through on Wall Street's record close with gains in the major semiconductor stocks, ignoring setbacks in SpaceX and AMD as they failed to meet sky-high expectations.
Kospi and Major Players
The Kospi added 4.0%, though by recent standards that was almost tame, led by SK Hynix and Samsung. In a sign of intensifying competition in the memory sector, Reuters reported the tech giants are evaluating chipmaking equipment from China's Advanced Micro-Fabrication Equipment (AMEC) for possible use at their Chinese factories.
Impact on U.S. Equipment Providers
That could be bad news for Applied Materials and Lam Research, which currently provide etching tools from the United States but face the growing risk of tighter export restrictions.
SpaceX and AMD: Contrasting Fortunes
SpaceX Cash Flow Concerns
SpaceX's troubles seem to be cash flow, or rather the lack of it. While revenue jumped to a record $7.8 billion, capex climbed above $18 billion, with almost $16 billion of that on AI alone. Analysts feared the company was burning through cash at such a ferocious rate it would have to come back to the market for more funding, through shares and/or debt.
Its bonds have taken a beating in recent weeks and there's a small matter of 911.5 million insider and employee shares that will be free for possible sale on Thursday. SpaceX's stock was down 7.5% after hours, wiping out most of a 9.4% gain made in regular trading.
AMD's Post-Earnings Reaction
Similarly, AMD shed 8.8% after hours as its sales and outlook topped the Street, but seemingly not by enough to justify the 142% gain its shares have made so far this year.
Oil Market Movements and Bond Yields
Another big move was oil, with Brent down another 1.5% or so at $78.24 a barrel and a world away from June's lofty peak of $102. The retreat eased pressure on bonds, nudging 10-year Treasury yields down to 5.60%, while markets pared back Fed tightening bets, with the implied odds of a September hike slipping to 57% from 67%.
Geopolitical Developments
Qatar said on Tuesday mediators were making progress in efforts to end the U.S.-Iran war, though details were hard to find and Tehran won't even confirm it is in the talks.
Analysts say reports on ship tracking suggest oil flows out of the Gulf were higher than expected and investors feared the market could quickly switch to oversupply should the Strait of Hormuz open even moderately.
Upcoming Earnings and Economic Data
Looking ahead, earnings reports in Europe include Siemens Energy, Infineon, Heineken, Novo Nordisk and a batch of banks. U.S. results include DoorDash, eBay, Uber, Eli Lilly, Honeywell, Kraft Heinz, SanDisk, Western Digital and Walt Disney.
Key Developments to Watch
- Federal Reserve Board Governor Lisa Cook speaks
- Data include EU S&P service PMIs for July, EU producer prices for June, US ISM services, S&P services PMI, ADP employment for July
(Reporting by Wayne Cole;Editing by Shri Navaratnam)
