Yesterday, SOX fell 6%, raising questions about whether this is the beginning of a decline or just a short-term adjustment.
So, why did it fall yesterday?
The excessive rise in treasury bond yields led to a readjustment of valuations for high-risk tech stocks.
Around 9 am yesterday, the unexpected poor performance of Entropic subscription revenue was released.
Although not explicitly mentioned, around 9 am yesterday, Entropic's subscription revenue increased dramatically but unexpectedly decreased.
ARR (subscription revenue) peaked at $65 billion on July 31st, while the expected figure was $74.3 billion.
The growth rate slowed considerably, and all tech stocks related to AI (semiconductor equipment, optical communications, memory, NAND flash, etc.) continued to decline.
Is this a semiconductor adjustment decline? This question will be partially answered in the next report.
Looking at the current data, it appears that short-term adversity has led to profit-taking.
Furthermore, Wall Street is currently in vacation season, resulting in lower trading volumes. This makes it easier for certain short-selling forces to manipulate the market.
Micron is currently above its 20-day moving average, while SOX is hovering around it.
Since this is the first decline in US semiconductors today and all companies are preparing to issue corporate bonds, it seems likely that this is a short-term adjustment decline.
To confirm whether this is an adjustment or not, we need to closely watch foreign buying today. Observing the direction of foreign macro trends and futures movements can help determine if foreigners are driving a short-term adversity or entering a downward channel. While foreigners are currently showing weak buying in pre-market trading, we'll have to wait for the market to open to confirm its validity. The fact that they didn't aggressively buy futures yesterday suggests they may be betting on a decline or waiting for an upward trend.
Ultimately, we need to uncover the truth. If institutional buying resumes today after continuous selling, it could signal the end of this short-term decline.
The negative impact on Entropic subscriptions (quarterly) can ultimately be assessed by looking at OpenAI's revenue growth. We can determine if Entropic's lower revenue went to OpenAI once accurate data becomes available. While concrete data is still unavailable, it is predicted that OpenAI is experiencing a strong surge and exceeding expectations with its revenue performance.
The current short-term adversity is likely tied to the future direction of OpenAI's revenue, which is at the peak of the Nvidia trilogy. Famous tweet predictions suggest that OpenAI's revenue is quite high.
When the market opens today, there may be initial downward pressure from institutional selling. If you decide to enter today, observe how far it drops in the early hours. If it falls too much, consider buying a portion of your intended amount. If the decline seems ambiguous, wait and see if it's a step-wise decline.
Even during a decline, approach the market calmly and objectively. Hopefully, this adjustment will present a good opportunity.
