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China Fund News Taylor

Brothers and sisters, A-shares rose during the day, and US stocks also rose at night! Tonight, US chip stocks collectively soared!

AMD "saves" technology stocks

Tonight, the three major U.S. stock indexes rose collectively, with the Dow Jones Industrial Average rising by more than 200 points and the Nasdaq Composite Index soaring by more than 2%!

The semiconductor sector, which has been sluggish for more than half a month, has soared collectively!NvidiaThe stock price plummeted 7% in the previous trading day, and soared 12% tonight! It is hard to imagine that the market volatility of a technology giant with a market value of 2.8 trillion US dollars is so huge!

The Philadelphia Semiconductor Index soared more than 5%!

In terms of stock prices, Broadcom rose nearly 10%, ASML rose nearly 7%, and TSMC rose more than 5%.

Analysts said that the surge in chip stocks stemmed from the second-quarter results just announced by chip giant Advanced Micro Devices (AMD).

In terms of overall performance, AMD achieved revenue of US$5.835 billion in the second quarter, an increase of 8.9% year-on-year; net profit was US$265 million, an increase of 881% year-on-year and 115% month-on-month.

In addition, AMD gave an optimistic revenue forecast for the current quarter, indicating that its new artificial intelligence processors are helping to boost growth. The chipmaker said in a statement on Tuesday that third-quarter revenue will be about $6.7 billion. Analysts on average expected $6.62 billion. The outlook shows that AMD is making progress in catching up with Nvidia, which dominates the artificial intelligence accelerator market.

AMD is Nvidia's closest competitor in the AI ​​accelerator market, but there is still a big gap between the two. AMD hopes to gain more share from AI models from technology companies such as Microsoft and Meta.

AMD raised its sales forecast for the second half of the year for its latest generation of AI graphics chip MI300, and said that the chip and its Epyc chip for servers have driven the company's data center business to achieve its largest growth ever. AMD CEO Lisa Su raised the company's revenue forecast for the MI300 graphics accelerator chip for AI data centers this year to $4.5 billion from more than $4 billion previously.

Su said on a conference call with analysts that data center GPU revenue is expected to exceed $4.5 billion in 2024, up from the $4 billion expected in April.

After the news came out, AMD’s stock price rose!

Chip stocks were also boosted by Samsung Electronics' strong earnings report, which posted its fastest net profit growth since 2010. The world's largest memory and smartphone maker said second-quarter net profit rose sixfold to 9.64 trillion won, beating analysts' average forecast of 7.97 trillion won.

On Wednesday local time, Morgan Stanley analyst Joseph Moore and his team released a research report saying that they are optimistic about Nvidia's long-term growth potential and that market concerns about it will weaken over time. Morgan Stanley re-rated Nvidia stock as a "preferred stock" while maintaining an "overweight" rating.

Moore's team believes that Nvidia's data center business will continue to contribute most of the company's growth over the next five years, especially in AI/ML (artificial intelligence/machine learning) hardware solutions. With the launch and delivery of the Blackwell super chip, Nvidia is expected to further consolidate its competitive position in the AI ​​field.

Morgan Stanley believes that this round of selling may be a very good buying opportunity and set Nvidia's target price at $144.00, 38.8% above Tuesday's closing price.

Waiting for the Fed's decision

The Federal Reserve will conclude its two-day policy meeting on Wednesday afternoon Eastern Time and announce the meeting's decisions and statement. Federal Reserve Chairman Powell will then hold a press conference.

The big question heading into Wednesday's Fed meeting is how willing officials will be to cut interest rates.

The Fed is widely expected to keep its benchmark short-term interest rate unchanged at a 20-year high of 5.25% to 5.5% while preparing to launch a series of rate cuts at its next meeting in mid-September.

Some analysts believe Powell will leave the door open to a rate cut in September without explicitly committing to any action.

Several former Fed officials and private-sector economists have said all the arguments for a rate cut in September, including better news on inflation and signs that slowing spending and hiring were increasing the chances that the economy was cooling too much, apply now and the central bank should cut rates on Wednesday.

However, senior Fed officials have signaled they are not yet completely sure inflation will move firmly toward their 2% target. Powell said after the Fed’s June meeting that the first rate cut would be a “huge decision” that “you hope to get right.”

“I think they will change the language in the statement to suggest a rate cut at the September meeting,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale.

On Wednesday, the ADP Research Institute, a U.S. private employment agency, reported that U.S. private employment increased by 122,000 in July. The median estimate of economists surveyed was an increase of 150,000.

The ADP data showed U.S. companies added the fewest employees since January, consistent with signs of weak labor demand.

ADP also said wage gains for job-hopping workers slowed in July to the slowest pace since 2021, as did pay gains for those who stayed put. The ADP data is consistent with signs of a gradual slowdown in hiring. Unemployment claims have been climbing in recent months, as have the number of Americans applying for unemployment benefits.