Global Chip Sector Slump Drives Negative Opening for Tel Aviv Stock Exchange

The Tel Aviv Stock Exchange is expected to open lower, mirroring sharp declines in the global semiconductor sector. Asian markets, including Tokyo and Taiwan, saw significant drops in chip stocks, with Tokyo Electron and Kioxia falling over 5% and 14% respectively. Kioxia was hit by a $229 million patent infringement penalty in Texas. South Korea’s market was closed for a national holiday, but SK Hynix plunged over 13% on Wall Street the previous day. The Nasdaq dropped 1.5%, led by semiconductor stocks like Micron, AMD, and Broadcom, each losing more than 5%. The selloff reflects investor concerns over whether AI-related investments justify current valuations amid accelerating spending.

In Tel Aviv, the TA-35 index declined about 1%, with tech and banking sectors down, while the oil and gas index rose 1.6% amid ongoing US-Iran tensions and rising oil prices. The Israeli shekel weakened over 1% against the dollar, trading near 3.02 shekels. Pharmaceutical company Rafa surged nearly 7% on its IPO, reaching a market cap of approximately 1.55 billion shekels. Shapir Engineering won a major PPP tender to extend Highway 6 northward, a project valued at about 2 billion shekels, expected to start in 2027 and open in 2030.

US Treasury yields fell slightly despite US-Iran tensions, with the 10-year yield at 4.54%. UK 10-year yields rose to 4.96% after May GDP growth of 0.1%. Meanwhile, creditors of Altice International accused the company of breaching debt agreements, raising insolvency concerns.

The US dollar weakened after a producer price index drop, easing expectations for immediate monetary tightening, though energy prices remain inflation risks. Brent crude oil hovered around $85 per barrel, up 16% since early July. US labor market data showed strength with lower-than-expected unemployment claims and steady retail sales.

Bank of America advised investors to reduce risk exposure due to extreme bullish sentiment among fund managers, with its Bull & Bear indicator reaching 9.4, a contrarian sell signal. The survey of 181 fund managers managing $484 billion highlighted optimism about a macroeconomic boom and AI capital expenditures, but also noted the highest US equity weighting since December 2024. Nearly half of respondents believe AI stocks may be in a bubble, while 61% do not expect cloud giants to cut AI capital spending.