Written by: Chao Xiang Research

On Tuesday, the three major U.S. stock indices collectively closed lower, with the S&P 500 down 0.32% to 7728.20 points, the Dow Jones down 0.34% to 53791.85 points, and the Nasdaq down 0.60% to 26445.446 points, while the Russell 2000 rose 0.32% against the trend. The pressure came from two directions: the recurring tension in the Strait of Hormuz suppressed risk appetite, and concerns over AI financing weighed on large tech stocks. Alternative asset management saw a significant surge, with KKR rising nearly 7%, and the storage sector also moved higher against the trend, supporting the market. The market proactively reduced positions on the eve of CPI, waiting for inflation data to determine the interest rate path for September.

Market cautious ahead of CPI, U.S. Treasury yields decline, gold retreats

The backdrop of the market on Tuesday was "waiting for data." The U.S. July CPI will be released on Wednesday, with Goldman Sachs believing inflation may be below general expectations, while HSBC bets on "moderate" data.

U.S. Treasury yields have reflected dovish expectations ahead of time. The 10-year Treasury yield fell about 2 basis points to 4.69%, and the 2-year yield fell about 2 basis points to 4.22%. The U.S. dollar index was basically flat.

Gold retreated from a two-month high. Spot gold fell slightly by 0.50%, while spot silver dropped by 1.6%. Oil prices fluctuated upwards, with WTI crude oil rising about 1.3% to $83.20 per barrel, and Brent crude oil increasing about 1.4% to $88.91 per barrel. Bitcoin surged and then turned down, at one point dropping 2% from its daily high.

Large tech stocks under pressure, Google down nearly 4% leading the decline

The Wind U.S. tech seven giants index fell 1.13% on Tuesday, with large tech stocks being the main drag on the market. Google A fell nearly 4%, marking the largest single-day drop in nearly six months, leading the decline of the Dow. Market concerns about AI capital expenditures and financing costs are still fermenting.

Jensen Huang clarified the details of the $500 billion financing plan on Tuesday, and Nvidia's credit risk has somewhat retreated. Morgan Stanley then confirmed that the investment is led by a third party, and Nvidia only provides "residual value support." This response did not fully dispel market concerns, and Nvidia still closed lower on Tuesday.

Nvidia is also developing a new generation of open-source AI model Nemotron, reportedly targeting trillion-parameter levels. The ongoing expansion of AI model scale means that computing power demand will not fade, but the calculations regarding financing costs and return cycles are being reassessed by the market.

Alternative asset management firms see a substantial rise, KKR up nearly 7%

The alternative asset management sector saw a substantial rise across the board on Tuesday. KKR surged 6.92%, Apollo rose 6.23%, and Blackstone increased 3.89%. The BDC sector (Business Development Companies) also rose across the board.

As funds are under pressure in tech stocks, they are shifting towards sectors that benefit from declining interest rates and capital intermediary business. As an important capital intermediary, alternative asset management directly benefits from the strong demand for AI infrastructure financing and the easing of interest rate expectations.

Storage sector rises against the trend, Samsung SK Hynix target price cut

Aside from alternative asset management, the storage sector was another direction supporting the market that day. The Philadelphia Semiconductor Index rose 0.87%, with stocks like Sandisk and Western Digital seeing varying degrees of increase.

There appeared a set of contradictory signals in the news. SK Hynix was reported to restart the construction of its No. 2 NAND flash memory production base in Dalian, China, expanding capacity by about 50%, with plans to introduce equipment before the end of this year and officially start production in the first half of next year. Large-scale capacity expansion usually indicates confidence in demand outlook.

However, Korean brokerages have concurrently downgraded target prices. Kiwoom Securities lowered Samsung Electronics' target price from 390,000 won to 350,000 won, and SK Hynix's target price from 2.2 million won to 2.1 million won, with the cuts exceeding 30% in some cases. The reason for the downgrade is that concerns over the peak of market conditions in the general memory chip industry have intensified.

With capacity expansion and target price downgrades occurring simultaneously, market judgments on the storage sector are diverging: AI-related HBM demand remains strong, but the market conditions for general memory chips may have peaked. On Tuesday, funds chose to trade on the narrative of "sustained AI storage demand."

Chinese concept stocks under pressure, Golden Dragon Index down nearly 3%

The Nasdaq Golden Dragon China Index fell 2.94% on Tuesday, with Tencent Music down nearly 12% and Bilibili dropping over 5%. Chinese concept stocks ended their streak of outperforming the market over several trading days and faced profit-taking ahead of the CPI data release. Global funds remain cautious about Chinese concept stocks amid macro uncertainty, with geopolitical risks and uncertainty in the pace of consumer recovery being the main oppressive factors. The pullback in Chinese concept stocks means that profit-taking pressure has been partially released before the data is announced, but the core variable on the macro level remains Wednesday's CPI.

On Wednesday focus: CPI data shaping the interest rate path for September

The market's sole focus on Wednesday is the U.S. July CPI data. If CPI is below expectations, U.S. Treasury yields may decline further, relieving valuation pressure on tech stocks, and strengthening the upward logic for alternative asset management and storage sectors. If CPI is above expectations, the optimism from last week's non-farm payroll data may be completely reversed, Treasury yields will rise again, and tech stocks will face pressure once more.

The S&P 500 is close to record highs, and Tuesday's volatile decline indicates that funds have already reduced positions before the data release. The direction of Wednesday's CPI will determine whether the market continues to break upwards or faces a correction.