Hello everyone, welcome back to the U.S. stock analysis channel. I'm lorder. Today was another volatile day in the markets, with all four major indices moving lower. The Nasdaq 100 fell 1.88%, and the Philadelphia Semiconductor Index dropped nearly 5%, with all 30 components in the red. This market action has more volatility than my show schedule during the break — but still less than the semiconductor sector. Today, we're going to focus on semiconductors and the debt and capital expenditure issues that could potentially ignite a bubble.

Let me state my position upfront: I'm cautious on the semiconductor sector in the near term, and I'm flagging risk for the broader U.S. stock market, especially for highly leveraged speculation.

Today, the market was weighed down by geopolitical tensions and hawkish Fed rate hike expectations, putting risk sentiment under pressure. The semiconductor sector is currently in a high-volatility state, but it hasn't triggered systemic forced liquidation risk yet. The core risk lies in whether the massive debt financing and capital expenditures by AI-related companies can be covered by future free cash flow growth. If the monetization process falls short of expectations, it could trigger a market repricing and sell-off.

On the geopolitical front, military clashes between the U.S. and Iran escalated over the weekend, heightening tensions. The U.S. President announced the reinstatement of a blockade on Iran and the reassertion of control over the Strait of Hormuz, also stating that a 20% fee would be imposed on cargo ships transiting the area. In response, Brent crude oil surged roughly 9%, climbing back above $80 per barrel.

On monetary policy, Federal Reserve Governor Christopher Waller delivered hawkish remarks. He said that if core inflation data in Tuesday's CPI report strengthens again, the Fed would consider a near-term rate hike and would view such a result as a genuine signal, not noise. The market is now pricing in a greater than 70% probability of a rate hike in September. Market participants believe that a sharp rise in storage costs could push inflation up by 0.5 percentage points. If tomorrow's data comes in strong, you may want to prepare for the first rate hike in September, with a second possible in March of next year.

The semiconductor sector took a beating today, but it hasn't yet formed a clear directional trend — it's in a "back-and-forth whipsaw" consolidation pattern. The Philadelphia Semiconductor Index SOXX is currently in a range-bound pattern. It needs to break above 621 to confirm a return to an uptrend, with support levels at 554 and 582. The semiconductor ETF SMH is showing divergence from SOXX. It's currently trading at 585, with high volatility but no extreme breakdown yet. It would need to break below 557 to confirm a bearish turn.

Nvidia's valuation is already at its lowest level since 2019. It's not only my second-largest holding, but from a cross-sectional assessment, its fundamentals are largely fine — the only question is the pace of growth, fast or slow. Even if growth slows, given that it commands an 80% market share, it would simply transition from a high-growth stock to a value stock, just appreciating a bit more slowly. For those who prefer stability, it's worth considering; for those seeking faster gains, you may want to look for smaller-cap, more speculative names.

The Korea Composite Stock Price Index broke below its 100-day moving average, a technical sign of weakening.

Risk One: Systemic risk. The South Korean stock market experienced large-scale forced liquidations due to high retail leverage speculation, with approximately 320,000 accounts liquidated on Monday. This illustrates the stampede risk that can arise when leveraged capital flows break down. Be alert to similar patterns recurring in other markets.

Risk Two: Debt and cash flow risk. AI giants have been financing capital expenditures by issuing massive bonds, totaling $182 billion this year. If future free cash flow growth falls short of expectations, it could lead to rising credit risk and higher financing costs, potentially triggering a valuation restructuring and a broad market sell-off.

Risk Three: Monetary policy risk. Fed Governor Waller's hawkish comments — if core inflation strengthens, the probability of a September rate hike increases significantly, which would pressure market liquidity.

Risk Four: Industry competition risk. Meta and xAI have already launched cheaper AI services. If this triggers a price war in the industry, it would slow down revenue growth and the monetization process across the entire AI sector.

Risk Five: Capital expenditure uncertainty. Keep a close eye on upcoming big tech earnings reports for guidance on 2027 capital expenditures. If guidance is significantly cut or turns negative, it would severely damage earnings expectations for the semiconductor industry.

Alright, that's all for today's program. The market is volatile, and there are plenty of risks. Stay sharp, everyone. See you tomorrow.