WTI Falls Toward $101 on US-Iran Mediation Reports, Triggering Intraday Market Reversal
AI Credit Concerns Persist Despite CoreWeave Rebound; Domestic Equities Enter Oversold Zone
Key Market Trends
① CoreWeave Rebound Highlights Clash Between AI Skepticism and Optimism
Equities opened lower as heavy selling pressure hit AI-related shares in early trading.
International markets closely monitored the sharp slump in South Korean equities and the steep debut decline of AI data center firm Elice.
Bloomberg highlighted these moves as evidence of eroding confidence in neo-clouds, noting a broader shift in market sentiment from unconditional buying of anything AI-related to a rigorous examination of individual companies' business performance and financial structures.
An uptick in indicators measuring CoreWeave's credit risk also added to market caution.
Conversely, positive outlooks on AI infrastructure demand persisted.
ABB reported no signs of a slowdown in data center construction, pointing to robust, ongoing demand trends.
UBS similarly reaffirmed strong demand observed at a recent data center expo, projecting robust AI infrastructure investments next year.
Cathie Wood continued to snap up CoreWeave shares via exchange-traded funds amid the recent pullback.
After tumbling early in the session, CoreWeave reversed course to trade higher.
② Crude Oil Pivots Sharply Lower on US-Iran Mediation Reports
International oil prices surged early in the session following reports of a tanker strike in the Strait of Hormuz and escalating Middle East tensions.
Market jitters were further fueled by reports that at least 18 vessels had come under attack over the past two weeks, alongside potential crude export disruptions stemming from damage to Saudi infrastructure.
Sentiment reversed sharply following Middle East media reports that a framework for mediating dialogue between the US and Iran was under discussion.
According to the reports, the Iranian president and Pakistani officials discussed a mediation proposal, with a draft reflecting both sides' demands reportedly handed over.
The proposal reportedly includes the release of Iranian funds frozen in Qatar and the International Atomic Energy Agency's (IAEA) access to nuclear facilities.
While formal talks have yet to be officially confirmed, spreading expectations for negotiations caused international oil prices to erase their gains, closing down 1.80% at $101.79 per barrel.
Equities similarly pared losses alongside the drop in oil prices.
③ Data Center Power Capacity Projected to Double; Semiconductor Stocks Diverge
SemiAnalysis projects that global data center power capacity will more than double from 25 gigawatts (GW) this year to 51 GW next year.
The scale of new server additions over the coming year is also expected to match the total volume of servers deployed through 2024.
This provides fundamental backing that, independent of debates over the sustainability of AI investments, actual demand for data center construction remains robust.
Amazon, Broadcom, and Tesla advanced, while Western Digital, Seagate, and Marvell Technology also showed strength.
Micron declined following reports that a Taiwanese labor union was preparing for a strike.
Apple traded lower after a rating downgrade cited slowing iPhone sales and valuation pressures.
Market Strategist's View
The domestic stock market lately has been reacting more sensitively to AI-related outlooks and rumor-driven news than to verified earnings. Investor sentiment remains compressed as new variables emerge almost daily, ranging from Chinese semiconductor and data center investments to neo-cloud financial issues.
The KOSPI's monthly decline for October has widened to roughly 19%. Over the past decade, sharp monthly pullbacks exceeding 10% have predominantly been followed by a rebound the next month. While historical statistics do not guarantee future performance, the current magnitude of the drop is undeniably exceptional.
Earnings and valuations warrant a close look as well. Based on strategist estimates, SK hynix is trading at a price-to-earnings (P/E) ratio of 3.6x based on this year's projected earnings, dropping to 2.8x for next year, with a price-to-book (P/B) ratio of 1.3x. Its share price has pulled back roughly 60% from its peak. Rather than current earnings themselves, the market is heavily pricing in the risk that Chinese semiconductor catch-up and a slowdown in data center investments could upend existing earnings forecasts.
Most of the recent AI-related headwinds lean closer to speculative outlooks on future possibilities than confirmed earnings shifts. Having endured extreme volatility, the market is unlikely to snap back into a stable trajectory immediately, but it has already entered a zone where the depth of the sell-off warrants a collective look. It remains essential to continuously monitor existing high-performing shares, earnings-growth sectors, and market leaders.
Today's Checkpoints
US-Iran: Whether reports of a mediation framework translate into actual negotiations
International Oil: Potential for further downside following WTI's close at $101.79
AI: Credit indicator movements for rebounded names like CoreWeave and neo-cloud providers
Semiconductors: Supply-demand shifts amid contrasting AI infrastructure demand forecasts and concerns over Chinese chips
Domestic Equities: The magnitude of large-cap rebounds following a 1.65% drop in MSCI Korea and a 1.84% rise in night futures
Key Indicators
US Dollar Index: 101.71 (-0.26%)
International Oil (WTI): $101.79 (-1.80%)
Volatility Index (VIX): 17.31 (-6.13%)
US 10-Year Treasury Yield: 5.11%
MSCI Korea Index: -1.65%
Night Futures: +1.84%
Source: Market Strategist's Stock Story (t.me/shmstory)
YouTube: Market Strategist TV www.youtube.com/@blueoak1004
This article has been reorganized from a Telegram post by Market Strategist with the author's consent. All content is subject to potential errors and does not constitute a recommendation to buy or sell, nor can it be used as a basis for trading. Under no circumstances may the contents of this post be used as legal grounds.
