Did the market crash on Friday?
What caused the unusual declines?
Two events that occurred just before Friday's market open caused this:
Let's start with the first one -
On Friday, very strong and surprising employment data was released,
The market expected 85,000 new jobs but received a huge surprise with an addition of 172,000.
So why is this bad news if the economy is strengthening?
Because now good news in the labor market is bad for the stock market.
The reason is simple: inflation is hot, and investors hoped for a weak labor market that would keep the Fed from raising interest rates,
Has that wall just been broken now?
Besides that, there was news in the chip sector that most retail investors did not hear about.
SemiAnalysis published a research report revealing that Nvidia's new chip, Vera Rubin, is expected to consume half the amount of memory it was projected to consume.
This data caused panic in the market, with the big fear being that demand for memory is decreasing, which led to sharp declines in the Korean market and throughout the supply chain.
Now let's get down to earth and analyze these 2 events:
Are investors wrong to be afraid?
Possibly yes,
Regarding the employment data, a breakdown of the figures shows an interesting picture:
The leisure and hospitality sector grew by more than 70,000 employees compared to an annual average of 14,000 employees.
The performing arts and sports sector grew by a complete surprise of 6,700.
The answer to this is the World Cup.
Most of the business growth is actually early recruitment in the hotel, restaurant, entertainment, and sports sectors.
The labor market is preparing for the World Cup,
This is a fictitious rise in employment data due to a large and temporary event.
The market actually remains flat, with the high-tech sector continuing to lay off thousands of employees, and the financial sector also continuing to weaken.
In short, the employment report does not truly indicate a strong labor market; the door to an interest rate hike has not yet opened.
Regarding the second concern, several senior chip experts we follow, including SemiAnalysis themselves, completely dismiss this fear.
Their explanation is simple: the decrease in memory quantity is not a result of lack of demand, but rather the opposite, a result of lack of supply.
Nvidia has one problem.
It has targets for selling processors, but it doesn't have enough processors.
Therefore, it reduces the amount of memory, increases its profit margins, and sells more processors.
In fact, the general memory market is expected to grow significantly.
Research firm TrendForce raised its market forecasts for 2026 by a triple-digit percentage and for 2027 by a double-digit percentage.
This market is still red-hot and definitely shows no weakness in the coming one to two years.
This week, the market is expected to see immense volatility due to several events:
1. Apple's developer conference - WWDC.
2. An Oracle report that is expected to give investors clearer directions on demand for artificial intelligence.
3. Very important economic data (CPI PPI).
4. Elon Musk's visit to ASML with rumors of a dramatic announcement.
5. The historic mega IPO of SpaceX.
Be prepared - it will be fun.