Written by: Tide Research

A weak non-farm payroll report was expected to reassure the market, and indeed, the Dow Jones surged to a historic high due to rising interest rate cut expectations; however, on the other hand, it was revealed that Anthropic is preparing to develop its own AI chip, directly undermining the assumption that "computing power will inevitably be scarce," which has supported chip stock valuations for two years. The Philadelphia Semiconductor Index dropped 12% in two days, while the Nasdaq 100 momentarily fell over 2%, effectively pinning the S&P 500 at the breakeven line.

Market Performance

The S&P 500 closed flat at 7483.24 points, up 1.76% for the week. The Dow rose 1.14% to 52900.07 points, closing at a record high since June 30, also up 1.76% for the week. The Nasdaq fell 0.80% to 25832.672 points, but remained up 1.97% for the week. The VIX closed at 16.15, down 2.65%; the dollar index dropped sharply by 0.87% during the day, marking the largest single-day decline in two weeks, but narrowed and rose 0.13% to close at 100.980; the Russell 2000 closed at 2995.0 points, essentially flat, down 0.03%.

The recent sell-off in chip stocks was triggered by Anthropic. The company is said to have launched a self-developed AI chip project and is negotiating with Samsung for a 2-nanometer process and advanced packaging for foundry cooperation. Almost no one in the chip design and computing power chain escaped unscathed: Marvell dropped 9.84%, Arm fell 6.58%, Micron fell 5.49%, AMD dropped 4.26%, Broadcom fell 2.41%, and even relatively resistant NVIDIA lost 1.39%, while TSMC ADR fell 2.27%; semiconductor equipment stocks took an even harder hit, with Teradyne plummeting about 13.6% and KLA falling about 11.5%; in the storage sector, SanDisk saw a single-day drop of over 14%, having shrunk by 27% from its peak, and "big short" Michael Burry increased his short position in Micron again at a price of $1051.87.

On the individual stock front, there were extremes. Zuckerberg acknowledged at the Meta all-hands meeting that the pace of development for AI agents over the past four months has not met the company’s own expectations. Following the news, Meta's shares dropped 4.9%; the market had already been speculating that Meta plans to rent out idle computing power, making this situation even worse. Tesla, on the other hand, illustrated what "buy the expectation sell the fact" means: in the second quarter, they delivered 480,000 vehicles, a 25% year-on-year increase, surpassing analysts' previous estimate of less than 400,000. It marked the strongest second quarter in the company's history, yet its stock price still fell by 8.2% during trading, marking the largest single-day decline in nearly a year, indicating that the market is now focused on AI and autonomous driving, while traditional metrics like delivery volumes are receiving less attention.

In the bond market, the 10-year U.S. Treasury yield rose 0.40 basis points to 4.4832%, while the two-year yield fell 3.73 basis points to 4.1371%. The commodity market showed clear divergence: WTI crude oil rose 0.16% to $68.69 per barrel, and Brent rose 0.32% to $71.80 per barrel; risk aversion drove precious metals higher, with spot gold soaring 2.30% to $4123.21 per ounce, and spot silver rising 3.04% to $60.9430 per ounce. Cryptocurrencies also rebounded, with Bitcoin collectively rising over 5% in two trading days and momentarily exceeding $62,000, achieving the best two-day performance since the end of February, and as of press time was around $61,406; Ethereum surged 5.5%, trading around $1699.54 as of press time. The European STOXX 600 index rose 1.41% to 648.35 points, setting a new closing record.

Macroeconomic Outlook

The non-farm payroll report was not surprising; the number of new jobs was only half of expectations and the previous value was substantially revised downward. The only unexpected aspect was that the unemployment rate actually dropped to a one-year low, making for a "weak quantity, stable quality" combination. The market quickly voted with its feet, reducing the probability of a July rate hike from one-third before the announcement to one-fifth, with most people now betting on a December hike. The judgment of the "New Federal Reserve Newsletter" is that this report did not truly change the minds of those officials in the Fed who have not yet made up their minds; over the next few months, price data will have a far greater impact on the interest rate path than employment data. The actual effect of the report was to give Wash a reason to remain stagnant this summer.

Pressures from the White House have not subsided. Trump declared on Thursday that Wash "must do what he has to do," and even if the Supreme Court ruled that he currently has no authority to dismiss Fed governor Cook, he still intends to find another way to eliminate Cook from the board; Wash responded firmly, stating that the independence of the Fed would not be changed. Wash himself, speaking at a European Central Bank forum, acknowledged that the recent decline in inflation expectations is an early sign that his tough stance is showing results, but said nothing about whether to raise rates in July. The Fed itself is not a single unified front; of the 18 officials, 9 support a rate hike this year, while the remaining 8 prefer to wait and see. European Central Bank President Lagarde also stated on Thursday that the rate hike in June was correct, as supply shocks continue to spread to other areas of the economy.

The sell-off in chip stocks has also affected the Asia-Pacific region. South Korea's Samsung Electronics and SK Hynix, heavyweight semiconductor stocks, have retreated by 20 to 30% from their June highs, in sync with the decline in U.S. stocks overnight; however, South Korea's semiconductor exports surged 71% in June, exceeding $100 billion for the first time in a single month, revealing a clear divergence between export data and stock price trends. This suggests that the current drop is more about emotions and valuation issues rather than a real loss of terminal demand.

This evening, attention should be focused on the June services and composite PMIs from China, Europe, the UK, and Japan.

Tide Perspective

Anthropic's development of its own chips and Meta's plans to sell off idle computing power may seem like two separate developments, but they actually speak to the same issue: AI companies are beginning to consider how to get higher returns from the computing power they have already spent on, rather than continuing to mindlessly expand production. This is more significant than any one piece of negative news, as it shakes the “scarcity” story that has supported chip sector valuations over the past two years, and the sharp declines in storage and equipment stocks are directly due to this logic.

However, the Dow reaching new highs indicates that money hasn’t truly left the market; it has merely shifted away from the overly crowded AI hardware sector into finance, consumption, and precious metals. Whether this sell-off in chip stocks is truly a turning point cannot be determined solely from one or two pieces of news; it will be seen in the upcoming earnings season and whether capital expenditures can really translate into revenue.