Global Tech Turmoil, Nvidia Scandal, and Israeli Market React

The Israeli stock market is set to open amid significant volatility, influenced by sharp declines on Wall Street and in Asian markets. This global downturn is largely attributed to reports that the board of chip giant Nvidia is considering the dismissal of its CEO and founder, Jensen Huang. Concerns surrounding the future of the artificial intelligence industry, exacerbated by this development, are causing futures markets to fall and casting a shadow over global investor sentiment.

Dual-listed Israeli stocks are expected to return to trading with a slight positive arbitrage gap for the TA-35 index. Among prominent stocks, Teva and Tower are anticipated to open with slight gains, while ICL and Kamatech may see minor dips. In the second and third tiers, Abogen shows a significant positive gap, contrasting with a notable negative gap for Pluri. Infrastructure company Y.D. Barzilai is making its public debut today after raising approximately 1 billion shekels, valuing the company at 2.25 billion shekels before money. CEO Dain Bar expressed enthusiasm for this milestone, stating the funds will support factory construction and strategic acquisitions to reach a 3.5 billion shekel backlog.

Yesterday's trading on the Tel Aviv Stock Exchange closed mixed, with the TA-35 index losing about 1% and the TA-90 index gaining around 0.5%. The banking sector led the declines, dropping 3.4%, followed by the finance sector. Biotech and energy infrastructure also saw losses. Conversely, the software sector rose 1.9%, with construction, communication, and real estate sectors also showing gains. The Tel Aviv Stock Exchange's own stock plummeted nearly 9.2%, erasing over a billion shekels in market value despite recent positive financial reports. International Bank's stock also fell following reports of a 13% drop in net profit. Other notable decliners included Delta Brands, Fibbi, and Enlight Energy, while Hyper-Global surged on record quarterly results. Naiaqs and TSG also saw significant jumps following positive earnings and acquisition news, respectively.

The Nvidia scandal has sent shockwaves through Asian markets, impacting local chip suppliers. Tokyo's Nikkei index is trading with volatility, down 0.8%, while South Korea's Kospi index, heavily influenced by companies like Samsung and SK Hynix, is down about 0.6%. Hong Kong's Hang Seng index is down 1%, and Shanghai's exchange shows a slight decrease. Wall Street futures indicate a negative opening, with Nasdaq futures down 0.9% and S&P 500 futures down 0.4%. The Nvidia stock drop, exceeding 8% in after-hours trading, follows reports of potential board action against CEO Jensen Huang amid an investigation into alleged corporate espionage and a personal relationship. This situation could lead to a cumulative market value loss of $600 billion for Nvidia. Analysts express concern, with some noting that without Nvidia, the AI industry as we know it might not exist. Competitors like AMD and Broadcom saw their stocks rise amidst the crisis.

In the bond market, Israeli government bonds experienced a general rise in yields across most maturities, indicating falling prices. The two-year government bond yield saw the sharpest increase. This trend suggests market expectations for continued high interest rates. In the US, bond markets were closed yesterday.

The dollar saw a slight increase against the shekel, trading around 3.17 shekels, influenced by higher-than-expected US inflation data. This has led to renewed expectations for interest rate hikes by the Federal Reserve. Analysts note a strong correlation between the dollar-shekel exchange rate and the Nasdaq index, partly due to the significant activity of institutional investors in Israel. In commodities, oil prices have rebounded after a two-month low, supported by Iran's stance on nuclear material and ongoing tensions in the Strait of Hormuz. However, rising US crude oil inventories and continued Ukrainian drone attacks on Russian energy infrastructure are also factors influencing the market.

Goldman Sachs has revised its US interest rate forecast, anticipating an additional rate hike in March due to persistently high inflation data. This prediction aligns with hawkish statements from Fed officials. The firm expects the Federal Reserve to implement a 25 basis point hike in March, in addition to the expected December increase. While acknowledging short-term inflationary pressures, Goldman Sachs maintains a cautious long-term optimism, projecting inflation to subside by late 2027, allowing for interest rate cuts. In bond markets, US two-year Treasury yields have surged.