As the U.S. consumer price index (CPI) for June came in below market expectations and U.S. semiconductor stocks surged, an analysis said the key driver of this rally was not prices but the resolution of "oversold" conditions. While concerns about a slowdown in AI capital spending (Capex) have not been resolved, growing expectations for rate cuts have created conditions for growth-stock valuations to recover.
Lee Euntaek, a researcher at KB Securities, said in a report on the 15th, "The details of the released CPI were good, but it may be hard at first glance to understand how semiconductors could soar this much on that alone," adding, "If you look closely, you can see why semiconductors reacted strongly to the CPI release."
The U.S. June CPI rose 3.5% year over year, below the market forecast of 3.8%, and core CPI was 2.6%, under the 2.8% consensus. In addition to falling gasoline prices, auto insurance (-2.0%), wireless service fees (-3.3%), and lodging (-2.8%) contributed to price stability. Sticky core inflation excluding shelter also slowed sharply, boosting market expectations for rate cuts.
However, the report said the latest semiconductor surge should not be interpreted simply as a CPI effect. In reality, worries about an AI investment slowdown still remain, and the fundamental picture did not change in a single day.
Lee cited the semiconductor correction in Nov. last year as an example. At the time, bond issuance by Meta and Oracle and the funding burden for AI investment acted as negatives, but the subsequent rebound was due not to the easing of AI investment concerns but to dovish remarks by New York Federal Reserve President Williams that heightened expectations for rate cuts.
He said, "Fears about the payback of AI Capex are not new," adding, "The reason stocks rebounded late last year despite such concerns, and the reason shares are falling now despite record earnings, are the same. It is because AI investment is being viewed from the perspective of a funding burden (r), not growth (g)."
He added, "In the end, share prices follow a very practical reason, not the dream and hope that 'AI will make money someday,' but 'can you hold out until then?'"
The report pointed to entry into an oversold zone as the direct backdrop for the jump. In fact, in the U.S. market, SK hynix ADR soared 29.3% in a single day after the CPI release.
Lee said, "Semiconductor demand concerns were not resolved last night. AI Capex worries have not disappeared, either," adding, "Even so, the reason SK hynix ADR jumped 29.3% in the U.S. market is oversold conditions. The market had already entered oversold territory."
KB Securities assessed that during this correction, the deviation from the 50-day moving average fell to the lowest level since the start of the rally, and the spread between Micron and SK hynix shares widened significantly, deepening SK hynix's relative oversold condition.
From a supply-demand perspective, it also judged that investor sentiment had entered an extreme fear phase.
Lee said, "Generally, individuals tend to be net buyers when prices fall and net sellers when prices rise," adding, "But recently, despite a sharp drop in prices, individual flows showed large net selling. This means investor sentiment is in very strong fear. It is a phase where even the courage to buy the dip disappears."
He went on, "Fundamental worries have not yet been resolved, but rebounds can occur in oversold territory," adding, "If earnings releases and conference calls in late July alleviate AI investment concerns, the market could move into another upward phase."