Written by: Chao Xiang Research

The crash of crude oil should have been the biggest boon for the US stock market on Monday, with WTI dropping 7.5% in a single day, but this boost was completely buried by the collapse of chip stocks. The Philadelphia Semiconductor Index temporarily plummeted by 5%, Nvidia fell nearly 5%, and Apple took the opportunity to surpass in market capitalization. Memory chips were particularly hard hit, with SK Hynix's US stock ADR falling below its IPO issuance price, and SanDisk's market value evaporating by 170 billion dollars in a month. Chinese concept stocks were the only highlight that day, rising against the trend by 2.5%, with Xiaomi’s ADR gaining nearly 9%. Trump continued to suggest that the US and Iran were in "deep negotiations," but Saudi oil facilities reportedly suffered another attack.

The three major indices fluctuated, with oil price crash failing to lift the market

The S&P 500 rose 0.02% to 7413.18 points. The Dow Jones increased by 0.51% to 52210.08 points. The Nasdaq fell 0.18% to 24932.081 points, and the NASDAQ 100 declined by 0.32% to 28039.211 points. The Russell 2000 rose 0.62% to 2948.035 points. The VIX rose 0.48% to 18.67.

Apple surpasses Nvidia to regain the title of global market value leader

The performance of the seven tech giants was mixed, with Apple rising 1.17%, Microsoft increasing 1.94%, and Google A up 2.13%, while Nvidia fell 4.99%, Tesla declined 1.22%, Amazon dropped 0.31%, and Meta fell 0.22%. Apple's market value rose to approximately 4.93 trillion dollars, while Nvidia dropped to 4.78 trillion dollars, changing the ranking. Since the beginning of this year, Apple's stock price has accumulated a 24% increase, and its stable capital expenditure pace has unexpectedly made it a safe haven amid this round of AI anxiety.

Memory chips collapse across the board, Chinese concept stocks fill the gap against the trend

The Philadelphia Semiconductor Index closed down 2.23% at 11554.88 points. TSMC ADR fell 1.03%, AMD dropped 5.17%, and ASML declined by more than 5%. The memory sector was particularly brutal, with Micron falling 2.25%, SK Hynix experiencing a temporary drop of 10% at one point, closing below the US IPO issuance price, and SanDisk plummeting by over 11%, while Kioxia's ADR also fell by more than 7%.

The direct trigger for this round of sell-off came from across the ocean. Chinese memory chip manufacturer Changxin Technology debuted on the Sci-Tech Innovation Board, skyrocketing over 450% on its opening day, with its market value briefly surpassing Intel, leading the market to interpret this signal as China's progress towards self-sufficiency in the DRAM field being faster than expected. Samsung Electronics was also reported to be considering procuring Chinese-produced DRAM to reduce costs; these two pieces of news directly impacted the valuation logic of US memory stocks.

However, most institutions are not as pessimistic, generally believing that Micron, SK Hynix, and Samsung's technological advantages in AI storage will not be shaken in the short term, and this downturn may ultimately only benefit those who dare to take over.

Chinese concept stocks were one of the few sectors that rose against the trend that day, with the NASDAQ Golden Dragon China Index rising 2.51% to 6257.87 points, nearing the 50-day moving average. Xiaomi's ADR rose 8.97%, Baozun e-commerce increased by 12.8%, Ehang increased by 7.5%, NetEase rose 3.5%, and Pinduoduo, Tencent, and Alibaba all rose by over 2%.

Nvidia's circular financing alarm raised

Nvidia's drop that day had another reason. The credit default swap spread for the company surged by 14 basis points in a single day, setting a historical record, as the market's confidence in its intertwined investment and guarantee business model worsened.

Nvidia recently disclosed plans to provide up to 250 billion dollars in financing guarantees for OpenAI's data center project in Ohio, in addition to previous cooperation with SK Group exceeding 500 billion dollars, making Nvidia a supplier, investor, and guarantor in the entire AI infrastructure ecosystem. This structure of giving orders to itself while also guaranteeing them has made many investors worry that if any part of the chain fails, the risks will rapidly transmit through this chain.

Goldman Sachs' Chris Hussey pointed out a contradiction, noting that while officials have increasingly hawkish statements, with Logan and Harmack issuing repeated warnings about interest rate hikes, and Board member Waller stating that the risks facing the US have completely shifted; on the other hand, short-term inflation expectations have dropped to their lowest point in over a year, and long-term inflation expectations have also been continuously declining over the past few months, with previously feared secondary effects of oil prices pushing up inflation not yet having manifested.

Confusion over US-Iran ceasefire signals, Saudi facilities attacked again

Trump's public statement is that the US and Iran are engaged in "very deep negotiations," and he described himself as being very patient with plenty of time, with the negotiation focus reportedly on reopening the Strait of Hormuz and restarting the nuclear agreement. However, Iranian officials completely contradicted this, with Tehran directly denying any negotiations and emphasizing that it will not allow the US to unilaterally decide when this conflict begins and when it ends.

A key oil facility of Saudi Aramco located in Abqaiq was reportedly attacked and caught fire, with the sensitivity of this location being comparable to the Strait of Hormuz itself, thus market sentiment tightened noticeably. There were also reports that the Pentagon is worried about the rapid depletion of US military air defense interceptor missile reserves in the Middle East, which objectively limits the US's ability to enlarge the scale of operations.

The Israeli Prime Minister has begun his trip to Washington to discuss the Iranian issue face-to-face with Trump, who himself acknowledged that there are still differences in how to handle the matter.

Fed decision suspense sharply increases, chance of rate hike triples in a week

This week’s interest rate futures indicate that the probability of the Federal Reserve raising rates by 25 basis points at this meeting has risen to the range of 34% to 38%. A week ago, this figure was only around 13%, and such drastic fluctuations in probabilities close to decision time are uncommon.

Bloomberg's Sebastian Boyd pointed out a contradictory point: on one hand, officials are becoming more hawkish, with Logan and Harmack repeatedly issuing interest rate hike warnings, and Board member Waller stating that the risks facing the US have completely shifted; on the other hand, short-term inflation expectations have fallen to their lowest level in over a year, and long-term inflation expectations have also been consistently declining in recent months, with the previously feared second-round effects of rising oil prices on inflation not yet appearing.

The earnings season has entered the main battlefield, with all seven giants making their appearances this week

This week, about one-third of companies in the S&P 500 by market value will successively report earnings, including Microsoft, Meta, Amazon, and Apple. Morgan Stanley's Chris Larkin reminded that geopolitical issues and oil prices could be the biggest uncertainties this week, but even if the earnings delivered by the seven giants are strong, as long as the level of AI spending continues to be questioned by the market, stock prices may not necessarily respond positively.

JPMorgan's team, however, maintains a tactically bullish outlook, believing that the decline in bond yields, the weakening dollar, coupled with strong corporate earnings will provide considerable upward space for the S&P 500, although crowded semiconductor positions and ongoing Iran conflicts remain the biggest risk points.