Nvidia plunge the reason for the decline in US stocks

Recently, AI concept stocks led by Nvidia suddenly began to fall, down 10%, the situation is serious, Nvidia fell nearly $200 billion in market value in a single day, and the market value of seven technology giants in the US stock market evaporated by $950 billion. The U.S. stock index fell 2%, its biggest weekly drop since 2022, amid a "big crash" as the Federal Reserve's financial stability report warned of inflation risks.

What exactly is going on in the stock market crash? How bad was it?

Strong for more than a year, the United States AI concept stocks are finally no longer strong, in addition to Nvidia, supermicro computer fell 23%, Netflix fell more than 9%, AMD fell more than 5%, in addition, META fell 4%, Amazon, Intel fell more than 2%, Microsoft, Apple, Google, Tesla fell more than 1%. Tesla shares fell below 150, the lowest since January 2023.

The Nasdaq index, which has been made of AI-concept stocks, has also fallen 5.52% in a single week, the worst weekly performance since November 2022. The S&P 500 fell 0.88 percent, its sixth straight day of losses and down 3.05 percent for the week. In addition, the Nikkei stock average is also down, down 9% in the last month.

What is the root cause of the decline in US stocks? The main points are as follows:

1. U.S. inflation exceeded expectations in March 2024. Data released by the US Department of Labor on the 10th local time showed that the US consumer price index rose again in March this year, up 3.5% year on year, up 0.3 percentage points from February, exceeding market expectations and also the highest annual increase in the past six months. The core CPI annual rate of 3.8% also exceeded market expectations, and the cost of living of Americans is rising.

On April 18, local time, Federal Reserve Chairman Williams said that if the data shows that the Federal Reserve needs to raise interest rates to achieve its goals, then the Federal Reserve will raise interest rates. On the same day, Atlanta Fed President Bostic said in a speech that if inflation falls back to stagnation or moves in the opposite direction, it will be open to raising interest rates.

On April 19, Chicago Fed President Goolsbee said that progress in reducing inflation had stalled and that it would take some time to see more deeply how the economy would evolve before moving interest rates.

Even Federal Reserve Chairman Jerome Powell said recently that the lack of new progress in easing inflation "clearly does not give us more confidence."

Against the backdrop of rising interest rates in the US dollar, dollar capital has invaded Asian financial markets in search of more opportunities to make profits, and international speculators and big short sellers have withdrawn a large amount of dollar capital from the US stock market and moved to Asia. This is the main reason for the lack of capital in the US stock market.

Escalation of the military conflict between Iran and Israel. Over the weekend, Iran sent a large number of drone strikes on Israel, and this weekend, Israel sent planes to bomb Iran, Iraq and Syria, and the spillover of the Israeli-Palestinian conflict added to the pressure on US stocks.

Third, ASML and TSMC broke orders decline affected some chip stocks. On April 17, ASML released its financial results for the first quarter of 2024, showing net sales of 5.3 billion euros, down 27% from the previous quarter. Gross margin was 51.0%, compared to 51.4% last quarter; Net income was €1.2bn, down 40 per cent from the previous quarter and below analysts' expectations. At the same time, its orders in the first quarter of this year fell by more than 60%, well below market expectations of 5.1 billion euros.

In addition, TSMC's orders have also fallen. The latest research report shows that in the first quarter of 2024, the pattern of global smartphone shipments has changed significantly, and iPhone shipments were 50.1 million units, down 9.6% from the same period last year, and the decline is the largest among similar mainstream mobile phone brands. This has led to a decline in the related business of TSMC, which manufactures chips for it.

4. Wall Street needs to kill the bulls after killing the bears. This year, the US stock market rose, many retail investors a lot of bullish, do not rule out the Wall Street crocodiles began to large-scale short, ready to pull the bull, cut the short players and long retail leeks.

So, as U.S. inflation picks up and the Federal Reserve raises interest rates, and the Israeli-Palestinian military conflict escalates, the U.S. stock market will continue to face similar dilemmas. However, today's Asia is not the Asia of 1998 financial storm, and the US dollar interest rate hike is coming to an end, and the US dollar capital may encounter a Waterloo in Asia.