• ASX likely to fall sharply after Nvidia’s 9.5pc drop
  • Alphabet, Microsoft, and Apple all also took major hits
  • Weak manufacturing data and falling oil prices are heightening fears

 

The ASX is likely to drop sharply on Wednesday after Nvidia copped a 9.5% hit in New York. At 8am AEST, the SPI ASX200 futures contract was pointing down by 1.2%.

Investors saw weak manufacturing numbers from the US and similar data from China over the weekend as a cue to sell off.

At the close of day, the S&P 500 lost 2.12% the blue chips Dow Jones was down by 1.51%, and the tech-heavy Nasdaq got pummelled by 3.26%.

Wall Street darling Nvidia wiped out around US$280 billion of its US$3 trillion market cap as traders believe the stock is overcooked and that its valuation is out of whack.

There have been warnings that AI isn’t delivering on its big promises yet, making it hard to justify those sky-high valuations.

Nvidia also got hammered after the US Justice Department slapped the company with a subpoena, digging into whether Nvidia broke antitrust laws. It’s a big step up in the probe into the top player in AI chips.

Some experts are advising investors to sell Nvidia at the current level.

“If you own lots of Nvidia stock, I will say the same thing that I said to Tesla shareholders back in early 2021 – just take the money,” said Nick Maggiulli at Ritholtz Wealth Management.

“You’ve won the game. You’ve hit a lotto that you are unlikely to hit again.”

Alphabet, Microsoft, and Apple also dropped by around 2-4% as the selloff hit the top tech giants trying to revolutionise the economy with AI.

Stocks were also dragged down after weak manufacturing numbers came out, raising questions about the US’ economic trajectory.

In other news, Boeing took a 7% dive after Wells Fargo dropped its rating to a sell, saying it can’t see any good news ahead for the stock.

United States Steel Corp tumbled by 6% after Vice President Kamala Harris and President Joe Biden both said the company should stay American-owned. This news is the latest setback for the proposed sale to Japan’s Nippon Steel.

And, crude prices sank 5% on the back of ongoing weak sentiment coming from China.

 

Making sense of it all

Just like in early August, September has started out badly.

The S&P 500 and Nasdaq 100 had their worst starts to September since 2015 and 2002, respectively.

Tech took a hit, the yen surged, a key manufacturing index missed the mark again, and oil prices dropped due to weak global demand.

The VIX, Wall Street’s “fear gauge,” spiked, while Treasury yields fell as traders bet on a big half-point rate cut from the Federal Reserve this year.

With inflation expectations steady, focus has shifted to the economy’s health, as weak signs could speed up policy changes.

Rate cuts usually help stocks, but not when the Fed’s rushing to avoid a recession.

Traders are predicting the Fed might slash rates by more than 2% over the next year – something not seen outside of a downturn since the 1980s.

With unemployment rising, traders will be anxious until Friday’s jobs report.

This report will be crucial in deciding whether the Fed goes for a smaller or bigger rate cut, according to analysts.

 

To other markets …

Gold price fell by 0.20% to US$2,492.91 an ounce.

Oil prices slumped by 5%, with Brent crude now trading at US$73.83 a barrel.

The benchmark 10-year US Treasury yield plunged by 8 basis points (bond prices higher) to 3.84%.

The Aussie dollar slipped by 1% to US67.14 cents.

Bitcoin meanwhile was down by 2% in the last 24 hours to US$57,955 and Ethereum fell by 3% to US$2,460.

 

5 ASX small caps to watch today

Lithium Australia (ASX:LIT)
LIT has signed a new exclusive three-year agreement with BYD Auto to recycle end-of-life batteries from New Energy vehicles in Australia. BYD Auto, a leading global player in the electric vehicle market, will provide substantial volumes of batteries, boosting LIT’s recycling operations. This deal aligns with LIT’s strategy to expand its lithium-ion battery processing capacity and is expected to increase its operating cash profits. The agreement includes a two-year extension option and provides for a service fee for collecting BYD’s used batteries.

Pivotal Metals (ASX:PVT)
PVT has reported promising results from its 2024 drilling at the Horden Lake Project in Quebec. New drilling has expanded the deposit to the northwest and southeast, showing high-grade intersections and confirming the resource’s growth. Significant finds include 8.2 metres at 3.24% copper equivalent and 26.8 metres at 0.83% CuEq, extending beyond previous resource boundaries. Infill drilling has shown continuous mineralisation, filling gaps in earlier data. The deposit is proving robust with potential for further expansion along its 3,200-metre length. Upcoming results from seven more drill holes are expected, with metallurgical testing and a resource update scheduled for late 2024.

Memphasys (ASX:MEM)
Memphasys is launching a three-year equine fertility study to advance the Felix device, aiming to make it a top choice for equine sperm selection. Conducted with the University of Newcastle and EquiBreedUK, the study will also involve Arrowfield Stud and Vinery Stud Pty. With the global equine AI market growing, Memphasys expects Felix to be ready for global distribution in 12 months, targeting over 4,000 horse breeders. The study will also explore oxidative stress in horses, potentially broadening the device’s applications. Memphasys is seeking a global distributor and anticipates leveraging over $1 million in research value from this $30,000 annual study.

Parkway Corporate (ASX:PWN)
Parkway has achieved a major breakthrough in brine processing technology, becoming the first in Australia to produce hydrochloric acid (HCl) from coal seam gas (CSG) brines. The new “salt splitting” technology, developed in collaboration with Parkway’s proprietary processes, successfully converts clean salt streams into valuable industrial chemicals like HCl and caustic soda. This innovation opens up significant opportunities in the mining and refining industries and addresses waste brine challenges. Parkway is exploring further applications of this technology, including processing seawater brines in the future.

Meeka Metals (ASX:MEK)
The Murchison Gold Project has received final approval for development, allowing Meeka to move forward. With the Mining Proposal approved, the company can now start construction of the haul road connecting the processing plant and open pit, and work on the accommodation village and office infrastructure is ramping up. Mining is set to begin early in 2025.