On the 29th (local time), the three major stock indices in the New York market closed lower. This was influenced by a sharp drop in technology stocks following news that Chinese e-commerce giant Alibaba had produced next-generation artificial intelligence (AI) chips.
On the 29th, based on Eastern Time in the U.S., the Dow Jones Industrial Average closed at 40,544.88, down 92.02 points (0.20%) from the previous day on the New York Stock Exchange (NYSE). The Standard & Poor's (S&P) 500 index fell 41.60 points (0.64%) to 6,460.26, while the Nasdaq Composite index finished at 21,455.55, down 249.61 points (1.15%).
News that Alibaba in China is developing and testing next-generation AI-related chips negatively affected investor sentiment in technology stocks. Concerns emerged that demand for other U.S. AI chips, including those from Nvidia, may decrease. It is reported that Alibaba's existing AI processors were manufactured by TSMC, but the company has now reached the stage of producing them in-house. Additionally, other Chinese technology corporations are intensifying the development of products that could replace Nvidia's H20 chip, further cooling investor sentiment in technology stocks.
The Chinese government recently mandated that more than half of the computing chips for public data centers be supplied by Chinese corporations. This is interpreted to pose significant challenges for U.S. semiconductor companies if corporations like Alibaba produce high-performance AI chips.
On this day, shares of Nvidia and Broadcom fell over 3%. The Philadelphia Semiconductor Index, which consists of AI and semiconductor stocks, also saw its share prices drop by over 3%. Among the 30 stocks that make up the index, all but one declined. TSMC, ASML, AMD, Arm, Lam Research, and Micron Technology all showed declines of around 3%.
Despite the adjustments in the market, optimism remained. Chris Zacarelli, chief investment officer at Independent Advisor Alliance, noted, "September is generally the weakest month of the year, but there are no factors seen that could break the bull market," and added, "If volatility occurs in September or October, it could present good buying opportunities."
The U.S. Personal Consumption Expenditures (PCE) price index for July announced on this day met market expectations, but inflationary pressures remained. According to the U.S. Department of Commerce, the core PCE price index, excluding volatile food and energy prices, rose by 0.3% from the previous month and increased by 2.9% from the previous year. This is the highest level in five months since February. The overall PCE index also rose by 0.2% from the previous month and 2.6% from the previous year, aligning with the forecast.
By sector, discretionary consumer goods and technology stocks fell by over 1%. Among large technology stocks with a market capitalization of over $1 trillion, all except Alphabet declined. Alphabet achieved a record high on this day, recognized for strengthening its AI technology competitiveness. Comprehensive technology corporation Dell Technologies presented third-quarter guidance that fell short of expectations, causing its share price to plummet by 9%.
Expectations regarding the Federal Reserve's interest rate policy were maintained. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the probability of a 25 basis point (bp; 1 bp = 0.01 percentage points) cut in the September benchmark interest rate was indicated at 86.9%.
The Chicago Board Options Exchange (CBOE) volatility index (VIX) recorded an increase of 0.93 points (6.44%) to 15.36.