Oil breaks US$100, Wall Street retreats and bond yields rise, inflation is becoming the market’s biggest risk again Global markets are starting Thursday in a more defensive position. Brent crude has broken above US$100 a barrel , U.S. Treasury yields are pushing higher, and Wall Street fell for a third straight session as investors reassess whether central banks may need to keep tightening rather than easing. For Malaysian investors, the key chain today is increasingly clear: Oil → inflation → interest rates → bond yields → USD/MYR → Bursa valuations. 30-second market snapshot Market / Asset Latest 🇺🇸 S&P 500 7,636.36, -0.48% 🇺🇸 Dow Jones 52,380.66, -0.77% 🇺🇸 Nasdaq 26,253.34, -0.64% 🇲🇾 FBM KLCI 1,714.34, virtually flat 💵 USD/MYR ~4.06 🇺🇸 U.S. 10Y Treasury ~4.84% 🇺🇸 U.S. 2Y Treasury ~4.42% 🥇 Gold ~US$4,396/oz 🛢️ Brent crude US$101.21/bbl 🛢️ WTI crude US$96.05/bbl ₿ Bitcoin ~US$79,300 🇯🇵 Nikkei ~64,760, -0.6% this morning Brent jumped about 3.4% Wednesda...
Shares in SK Hynix Inc slid by the most in 20 months following a significant rout in tech stocks, overshadowing the company's strong financial results for the June quarter.
Key Financial Highlights:
- Revenue: SK Hynix reported sales of 16.4 trillion won (US$11.9 billion), more than double the previous period and ahead of analyst estimates.
- Operating Profit: The company achieved an operating profit of 5.47 trillion won, with an operating margin of 33%.
Despite these strong results, SK Hynix’s stock fell as much as 8.9% on Thursday in Seoul, marking the biggest intraday decline since November 2022. This drop followed a broad sell-off in tech stocks in the US, including a 6.8% decline for Nvidia, as investors grew wary of inflated valuations in the AI sector. Samsung Electronics Co, which is also struggling to penetrate the high-end memory market, fell 2.3%.
Market Sentiment and Analyst Insights:
- Investor Concerns: There are growing concerns that spending on AI and data centers may slow unless companies like Microsoft Corp and Alphabet Inc can generate significant revenue from their AI investments.
- Morgan Stanley's Move: Morgan Stanley recently cut AI chip-sector stocks, including SK Hynix and Taiwan Semiconductor Manufacturing Co, from its focus lists, indicating it may be time to pause on these investments.
Company's Strategic Moves:
- HBM Chips: SK Hynix has been a major beneficiary of the demand for high-bandwidth memory (HBM) chips, essential for creating AI services like ChatGPT. The company plans to closely analyze customer demand and profitability to ensure capital spending remains within its operating cash flow.
- Revenue Growth: Revenue from high-bandwidth memory surged over 250% in the quarter.
- Future Plans: SK Hynix aims to mass produce next-generation 12-layer HBM3E chips this quarter and begin supplying customers in the fourth quarter. The company expects to secure HBM sales growth of more than 300%.
Industry Context:
- Competitive Landscape: SK Hynix's aggressive production and innovation strategies may help it widen its lead over competitors like Samsung and Micron Technology Inc in the high-end memory market.
- Market Risks: Analysts caution that the hype surrounding AI applications may be driving outsized market gains, with AI technology yet to reach its full potential.
Investment and Expansion:
- Capital Expenditure: SK Hynix's capital expenditure this year is expected to exceed earlier plans due to the boom in AI hardware spending. The company has earmarked US$15 billion in South Korea to meet demand for high-end chips and plans to invest US$3.9 billion in an advanced packaging plant and AI product research center in Indiana.
The recent performance underscores the volatility in the tech and AI sectors, highlighting both the opportunities and risks faced by leading companies like SK Hynix. Investors should stay informed about market trends and company strategies to navigate this dynamic landscape.
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