[Seoul Pre-Market Brief] Election Uncertainty Lifts Markets on November 5th

U.S. stock market rises as midterm elections conclude... VIX plunges 20%, Big Tech rises, but semiconductors are weak... Concerns about AI regulation persist

Key market trends

• ① Uncertainty eases after the election… 9 industries rose

The U.S. stock market rose on the assessment that political uncertainty has decreased with the conclusion of the midterm elections. Excluding energy and industrial goods, 9 industries rose, and international oil prices and government bond interest rates fell significantly, which also had a positive effect on investment sentiment.

As President Trump announced his intention to accept the election results and cooperate with the Democratic Party, concerns about political chaos after the election also decreased.

The stock market was generally strong after the past midterm elections. In the last 19 midterm elections, the stock market all rose six months later, and the average increase rate was 14.2%. There was also a prediction in the market that if the dispersion of congressional power makes it difficult to implement large-scale new policies, policy uncertainty and pressure to expand finances may decrease.

Actual policy changes are expected to be confirmed after January next year when the new parliament is inaugurated.

• ② Big tech has reported prices, semiconductors have fallen… AI Internal Differentiation

Despite the easing of election uncertainty, the trend of AI-related stocks was mixed.

Apple and Microsoft broke record highs, and Amazon and Alphabet also rose significantly. On the other hand, as Nvidia fell, Apple again ranked first in market capitalization, and memory-related stocks such as Micron and SanDisk also showed weakness.

AMD and Super Micro Computer were also put up for sale after announcing good earnings. AMD predicted that its sales will increase by 80% next year and that its sales in the next quarter will exceed Intel's for the first time, but it was unable to avoid the impact of the recent decline in the valuation of the semiconductor industry.

The market has begun to distinguish the impact of each company based on data center investment speed, financing, and regulations rather than AI growth.

• ③ Texas data center regulations highlighted... Far from total disruption

As the Democratic Party won the Texas gubernatorial election for the first time since 1990, data center policy also emerged as a new variable.

The president-elect has stated that he will temporarily suspend approval of new data centers until the state legislature establishes relevant safeguards. The purpose is to reduce the burden that data centers place on the power grid, water use, and residents' electricity bills, and to review tax benefits.

It is necessary to distinguish it from policies that halt the AI ​​industry or the existing data center business itself. There is a possibility that there will be coordination between Big Tech and state governments in the future regarding who will bear the burden of power costs and local communities.

In the market, concerns arose that the burden could be greater on data center and neocloud-related companies with relatively weak financial power, and related stocks fell sharply.

Market Man's Perspective

Yesterday, the domestic stock market was overly sensitive to the results of the U.S. midterm election and concerns about data center regulations. In the U.S. stock market, stocks related to semiconductors and AI infrastructure showed weakness, but as a whole, 9 out of 11 industries rose.

No matter which party controls Congress, it will not be easy for the United States to give up investment in AI. A huge amount of money has already been invested, and it is directly linked not only to AI competition with China but also to local investment and jobs. The recent data center controversy is also closer to power and water use and the cost burden on residents than AI itself.

The problem is that the market has become very sensitive to AI-related news. Even within the same AI, the gap between industries and stocks is increasing, with big tech rising and semiconductor and data center-related stocks falling. For the time being, it is important to check where supply and demand are moving rather than the direction of the index.

It is difficult to determine a short-term bottom in the domestic stock market. As the MSCI Korea Index and overnight futures showed weakness, early-day semiconductor volatility may continue. It is necessary to check whether the recent decline has been excessive compared to the actual change in performance and distinguish between the movements of existing leading stocks, stocks that have benefited from policies and investments, and stocks that have accumulated institutional purchases.

Today's checkpoint

Semiconductor: Samsung Electronics and SK Hynix react after weakness in U.S. memory and semiconductors

AI Regulation: Will Texas Data Center Policy Concerns Spread Further?

Supply and Demand: Changes in semiconductor trading direction by Foreign Investors and institutions

Industry differentiation: Shift in supply and demand between big tech and AI infrastructure and semiconductors

Oil prices and interest rates: Oil prices in the $88 range, effect of 4.88% decline in US 10-year Treasury yields

Key indicators

Dollar Index 101.51 (-0.35%)

International oil price $88.12 (-7.97%)

Volatility Index 16.61 (-20.26%)

US 10-year Treasury bond interest rate 4.88%

MSCI Korea Index -1.79%

Night Futures -1.65%

Source: Market Man's stock story t.me/shmstory

YouTube: Sihwangman TV www.youtube.com/@blueoak1004

This article was rewritten from Shihwangman's stock story Telegram post with the author's consent. All content may contain errors and cannot be used as a basis for buying or selling as it is not a recommendation to buy or sell. The content of this post cannot be used as legal basis under any circumstances.