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the us stock market had a bad start in september, and concerns about us economic growth have re-emerged, with market volatility rising significantly last week. the weakness of technology stocks has attracted widespread attention, with the nasdaq falling more than 5% last week, nvidia's market value evaporating more than $400 billion, and the philadelphia semiconductor index continuing to be sluggish.

jpmorgan warned that the deterioration in technical indicators may mean that the adjustment is far from over, depending on whether concerns about the u.s. economic outlook can improve quickly.

(source: china business news)

nvidia continues to adjust

the strong performance of large technology stocks helped drive u.s. stocks to record highs in the first half of the year. however, their recent volatility has made investors nervous. on the 3rd local time, nvidia's market value shrank by $279 billion, which was the largest single-day market value drop in the history of u.s. companies. last week, the market value of this artificial intelligence trendsetter evaporated by a total of $406 billion, also setting a historical record, exceeding the combined market value of amd and qualcomm.

although second-quarter revenue and profit exceeded expectations, nvidia's previously released quarterly forecast failed to meet investors' wild expectations. "(nvidia)'s second-quarter earnings were good and exceeded expectations," said steve sosnick, market strategist at interactive brokers. "but it's clear that the growth is shrinking quarter by quarter, and investors haven't ignored that."

in addition, regulatory pressure may be a new trouble. sources said that the us department of justice has issued subpoenas to nvidia and several other companies, seeking evidence of the company's suspected violation of antitrust laws. this move marks a new stage in the us government's investigation into nvidia. although the company later denied it, market concerns have not dissipated.

for investors, if nvidia falls, index funds tracking the s&p 500, nasdaq 100 and other benchmarks will also suffer losses because the stock is highly weighted in these indexes. dow jones market statistics show that as of the end of august, nvidia accounted for 23% of the s&p 500's total return so far this year. despite the recent decline, nvidia's stock price is still up more than 100% in 2024, making it the best performing stock in the s&p 500 so far this year.

regarding nvidia's future trend, mizuho securities analyst jordan klein wrote that it is not expected to rebound above $130 in the next few weeks. "overall, the industry seems to continue to be stuck in the mud except for a series of better economic 'soft landing' macro data in the next few weeks. but there is no reason to panic further or look for more weaknesses now."

bank of america analyst vivek arya mentioned several "headwinds" in his research report: potential regulatory pressure and market volatility, as well as long-standing questions about whether the monetization of artificial intelligence is meeting expectations.

but arya still believes that nvidia's stock price will grow at a convincing valuation, "the key catalyst for fundamental recovery may be supply chain data points in the coming weeks that confirm the readiness of blackwell's new product shipments."

jpmorgan warns of risks in semiconductor sector

it is important to note that nvidia's performance has also cast a shadow on the semiconductor industry. last week, another chip giant focusing on artificial intelligence, broadcom, gave poor performance guidance, causing its stock price to plunge sharply.

as a result, the philadelphia semiconductor index (sox) plunged 12.4% in the past week, its worst performance in nearly four and a half years, with all 30 components falling. what's worse is that these companies are trading below their 50-day moving averages, which are generally regarded by technical analysts as a watershed in short-term trends.

schwab believes that the reason the semiconductor sector is important to the overall market is that chips have been market leaders over the past two years and are seen as a proxy for the long-term growth story of artificial intelligence. one of the pillars of the bullish thesis is the growth runway of artificial intelligence and the potential for increased productivity, both of which help corporate earnings. perhaps the price action in sox indicates that artificial intelligence-related valuations are being reset based on modest growth expectations.

in early august, as more and more people were concerned about the impending us recession, the market style shifted from large-cap technology stocks to cyclical sectors, and the stock market began to fall rapidly from its highs, and then us stocks rebounded in mid-august. compared with the gains of the three major stock indexes, the semiconductor sector obviously lacked momentum.

looking ahead, jpmorgan believes that the philadelphia semiconductor index is approaching a point where the sell-off could continue until 2025, and could even be at risk of a full retracement of the bull market that began in late 2022. the wall street giant's technical strategy team wrote in a note to clients: "today, the philadelphia semiconductor index shows a clear 'head and shoulders top structure', with the march high as the left shoulder, the july high as the head, and the august high as the right shoulder."

jpmorgan also mentioned the risks in the report: "the line connecting the low points between the shoulders and the head is the neckline. after successfully holding the support of the previous low, the bulls were unable to set new highs, and breaking the support level gave those bulls a reason to give up. the neckline is about 5.2% below the current level. once it is effectively broken, it will constitute a classic bearish pattern. in the worst case, the market will change the long-term trend and point to a full retracement of the rebound in 2023-2024 until next year, when it may fall further by more than 50% from the current level."

in charles schwab's view, considering the oversold structure of technology stocks, there may be a need for a technical rebound in the short term. however, the agency is slightly cautious about the sustainability. on the one hand, september is the worst performing month in the history of us stocks. on the other hand, as the federal reserve is approaching the node of interest rate cuts, the market is very sensitive to data, which exacerbates the potential volatility risk.