Market expectations for the service sector were dashed as first-quarter results were released, prompting an immediate sharp decline in the stock market. The software sector once again experienced a nightmare of "software apocalypse." Although Tesla gained attention by announcing plans to expand investments in semiconductors, its stock price plummeted, while the semiconductor sector continued an 18-day streak of gains following a series of strong earnings reports. After the market close, Intel also posted far better-than-expected results, sending its stock soaring in after-hours trading.
On the morning of the 23rd, the New York stock market opened with major indices down 0.3% to 0.4%. This decline was primarily driven by a collective crash in software stocks, led by ServiceNow, which disappointed investors despite surpassing expectations for revenue and net income. Concerns over delayed cloud contracts due to the Middle East conflict prevented subscription revenue growth from meeting expectations. Particularly, fears that AI technology advancements would lead to job automation and replacement fueled the stock price decline. Analysts pointed out that while the results themselves were decent, the qualitative weakening of future growth guidance, especially with the contribution of the recently acquired cybersecurity company excluded, resulted in lowered outlooks compared to previous forecasts, intensifying selling pressure.
Investment banks also significantly lowered their target prices, causing the software sector to suffer further declines. Major institutions such as Goldman Sachs, Piper Sandler, and Baird lowered their targets, and IBM's software business growth rate slowed due to poor performance of its cloud subsidiary, Red Hat. Consequently, the software sector ETF plummeted nearly 6%, recording its fourth collective decline this year. Microsoft also fell by 4% due to the implementation of a voluntary early retirement program, and software-related stocks generally experienced negative impacts.
In contrast, Tesla's stock price was adjusted amid increased capital expenditure, delays in mass production of Optimus, and postponement of the full self-driving schedule, increasing uncertainty. OpenAI projected that Tesla's transition to an AI company would take over three years and removed its target price. However, the semiconductor sector maintained its upward trend, offsetting the declines in software and Tesla. Thanks to major companies like Texas Instruments, Rambus, and SK Hynix recording earnings surprises, the semiconductor sector enjoyed an 18-day rally, and the Philadelphia Semiconductor Index showed strong performance, rising by 1.71%.
Demand for AI computing continues to increase, and investments are active, with 82% of corporate CFOs stating they will invest in AI this year. After the market close, Intel's revenue and EPS significantly exceeded Wall Street expectations, causing its stock to surge in after-hours trading. Intel pointed to a shortage of data center server CPUs as a supply issue and presented figures for the second-quarter revenue forecast that exceeded expectations.
Misinformation regarding Iran negotiations caused significant market turbulence. When Israeli media reported the resignation of Iranian President Galibaf, the three major indices plummeted by over 1%. Concerns spread that the internal division between hardliners and moderates in Iran, as well as the influence of the military, could negatively impact negotiations, fueled by President Trump's social media statements and reports from The New York Times. However, after 2 PM, Iranian media refuted the resignation claims as misinformation and clarified that air defense system activations were test runs, leading to some rebound.
Oil prices also continued to rise amid war fears. Brent crude and West Texas Intermediate crude prices each rose by over 3%, maintaining levels around $105 and $95 per barrel, respectively. The International Energy Agency warned of an energy security crisis due to a daily loss of 13 million barrels of oil, and a survey by the Dallas Federal Reserve indicated that traffic recovery in the Strait of Hormuz was only at 20% as of May. The United States is strengthening its response through the approach of its third aircraft carrier to the Middle East and the seizure of Iranian tankers, while the Israeli Defense Minister officially announced preparations for an attack on Iran.
Finally, economic data confirmed the resilience of the U.S. economy. New unemployment claims were recorded at 214,000, maintaining a relatively stable state, and the S&P Global Purchasing Managers' Index preliminary reading reached 52.0, a record high since 2022. The manufacturing index also rose to 54.0, demonstrating continued economic vitality.