Global Markets Surge on AI Chip Demand, Wall Street Eyes Margin Debt Concerns

Global markets experienced significant gains, led by a surge in AI chip stocks, fueled by Meta's new AI agent and Alibaba's announcement of its most powerful AI chip yet. Asian markets saw the Kospi index in South Korea rise 2.2%, driven by Samsung Electronics and SK Hynix, while Hong Kong's Hang Seng added 0.4%. Japan was closed for a holiday.

Wall Street futures remained stable after major indices posted their strongest trading day since early August. The Nasdaq Composite jumped 2.3%, closing at a record high, the S&P 500 gained 1.5% near its peak, and the Dow Jones increased 0.7%. The US semiconductor index soared over 4%, Meta's stock climbed 11%, and AMD's market value surpassed $1 trillion.

Investors in Tel Aviv are returning from the Yom Kippur holiday, hoping to maintain recent positive momentum. Dual-listed stocks showed significant pre-market gains, with Tower Semiconductor up 9%, Nova and Camtek up 4%, and Nice up 5%. Conversely, Palo Alto Networks was down over 2%, and Elbit and ICL saw minor declines.

However, concerns are mounting on Wall Street. The 10-year US Treasury yield crossed 5%, oil prices remain above $100 a barrel, and the Federal Reserve's recent interest rate hike has sparked fears of further increases. Adding to the unease, margin debt in the US rose 2.6% in August to $1.45 trillion, approaching record levels. This high leverage has reignited debate about market vulnerability, with historical patterns showing sharp increases in margin debt preceding major market downturns, though recent data shows an increase rather than a decrease in August.

JPMorgan CEO Jamie Dimon has warned investors to be concerned about record margin debt coinciding with market highs. While some analysts question its predictive power for market direction, others point to historical precedents where rising margin debt preceded significant market crashes, such as the dot-com bubble burst and the 2008 financial crisis.