U.S. Treasury Yields Hit New High! Tech Companies' Free Cash Flow Turns Negative! Can AI Stocks Be Bought at the Bottom? Key Analysis Here

Last week, Alphabet and Tesla plunged 7.13% and 14.52% respectively on their first trading day after earnings (July 23). The main reason was a sharp increase in capital expenditures, causing both companies' 'free cash flow to turn negative for the first time in history.' Tesla's free cash flow turned negative for the first time in two years, while Alphabet recorded its first-ever negative figure. The market is concerned about the sustainability of their capital spending and future capital returns.

However, investors should note that the reason for continuously increasing AI-related capital expenditures is that the physical AI and cloud infrastructure sectors are currently in a 'critical pain period' of building extremely high competitive barriers. Moreover, investments in AI infrastructure have already begun translating into significant revenue momentum. Alphabet's Google Cloud reported Q2 cloud revenue growth of 82% year-on-year, reaching $24.77 billion, with an operating profit of $8.81 billion. Tesla's FSD subscriptions grew 56% year-on-year in Q2 to 1.48 million users.

From an industry fundamentals perspective, investors need not worry about the AI supply chain. However, the current risk investors should monitor is 'U.S. Treasury yields.'

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Escalating tensions between the U.S. and Iran also contributed to last week's international stock market volatility. Although WTI and Brent crude oil prices surged, they remain far below their post-conflict peak. However, 'the yield on the U.S. 10-year Treasury note rose to 4.7%, hitting a new high since the start of the U.S.-Iran conflict,' and this occurred despite cooling year-on-year CPI in June. Rising U.S. Treasury yields will impact the performance of tech stocks, and investors should closely monitor yield trends.

Rising U.S. Treasury yields and the correction in U.S. tech stocks have significantly affected Taiwan's stock market. The market may test its bottom through an N-shaped or W-bottom pattern. Investors should control their holding ratios. Strong stocks may hold the July 20 low or the quarterly line. How should one operate? Join our LINE@:

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From Korea's deleveraging to the new high in U.S. Treasury yields, international financial markets face two rounds of tightening challenges. The index has pulled back about 10% from its peak of 48,218 points, but mid- and small-cap stocks have fallen heavily, and even large-cap AI leading stocks have seen significant corrections. TSMC and financial stocks have become key stabilizers. However, investors need not worry excessively. Market pullbacks present opportunities to enter positions or rotate stocks.

TSMC, AI leaders, and high-performing supply chain companies benefiting from AI industry fundamentals will be top investment targets. Technically, stocks that have held the July 20 low or the quarterly line, showing support at lower levels, are preferred. How should one handle price-increase theme stocks? What are the top targets when the index retests 42,000 points? Welcome to join our LINE@.

TSMC Supply Chain: Creative Electronic (3443-TW), Chung Sand (1560-TW), Sun Yung Semiconductor (8028-TW), Hsiang Ming (8091-TW), Fan Hsuan (6196-TW), Asia Pacific Construction (6139-TW), Wan Run (6187-TW), Taisun (5434-TW)

AI Leaders: Hon Hai (2317-TW), ASE (3711-TW), Tripod Technology (2383-TW), Laminates (6213-TW), Unimicron (3037-TW), Accton (2345-TW), Qisda (6285-TW), Molex-KY (3665-TW), Delta Electronics (2308-TW), Lite-On Technology (2301-TW)

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Source: Moore Investment Advisory – Analyst Yeh Chun-Min

The individual securities recommended and analyzed by our company have no improper financial interests. Past performance does not guarantee future profits. Investors should make independent judgments, carefully evaluate, and bear investment risks on their own.