AI boom brings back optimism: KOSPI in a bull rally
Globes presents the first update on the state of global markets. Global optimism led by AI and a strong earnings season. Rally in Asia: South Korea's KOSPI jumps 4.1% into bull market territory. Positive arbitrage in Tel Aviv led by chip stocks. Too good to last? Why Wall Street fears peak earnings in the S&P 500
Trading review: ongoing reports, trends, indices, stock prices, bonds, foreign exchange, commodities, and analyst recommendations. 7:00. Optimism is being recorded this morning in global markets, in the shadow of an impressive recovery in the artificial intelligence sector and a strong tailwind from the second-quarter financial reporting season. The positive results of tech giants, alongside aggressive growth forecasts and signals of continued massive investments in AI infrastructure, have dispelled investor concerns and ignited a renewed wave of gains. The expectation for the continued expansion of the technological "super-cycle," combined with financial results that mostly beat analyst forecasts, sent leading Wall Street indices to sharp gains last night - and the positive effect continues to clearly radiate to trading on Asian stock exchanges and futures this morning.
Asia
In Asia, this morning, trading on the continent's stock exchanges is mostly positive, with the KOSPI index in South Korea stealing the show, jumping 4.1% as it shows a recovery of about 23% from the late July low and officially enters bull market territory. The sharp gains in Korea are led by chip giants Samsung Electronics and SK Hynix, which are receiving a strong tailwind from the renewal of positive sentiment around AI investments and the strong results published by AI companies in the US. In Japan, the Nikkei 225 index jumps 1.6%, while in China more moderate gains are recorded as the Shanghai index rises 0.4% and the Hang Seng index in Hong Kong shows stability with a slight rise.
David Morrison, a senior market analyst at Trade Nation, noted to CNBC that "the AI investment boom is far from over," pointing to the strong results of American tech companies as a trigger for the current wave of gains in memory chips. At the same time, Mark Newton, head of technical analysis at Fundstrat Global Advisors, estimates that the rally in Korea has room to continue: "This is a positive sign in the short term for the memory sector within the technology industry. The combination of the recovery in South Korea and the strengthening of chip stocks is broadening the rotation back to technology, and Korea and memory stocks currently look like the right tool for exposure to risk appetite in the market."
Wall Street
Wall Street futures this morning are trading in a mixed and stable trend, around baseline levels. Nasdaq futures add 0.1%, S&P 500 futures are stable, while Dow Jones futures weaken by 0.1%.
Yesterday, trading on Wall Street closed in a mixed trend with a positive bias, as the technology sector continued to concentrate the bulk of demand. The Nasdaq index led the gains, climbing 0.5%, while the S&P 500 index added 0.3%. Conversely, the Dow Jones index maintained stability and closed with a slight decline around baseline levels.
Parallel to the gains in the major indices, the Russell 2000 index of small-cap stocks closed with a gain of 0.7%. The index is trading in all-time high territory and is outperforming the leading indices - a positive signal of investors' willingness to increase risk appetite in the market. Since the beginning of 2026, the Russell 2000 has jumped 22.6%, compared to a gain of only 13.2% in the S&P 500 index.
Strong financial results and optimistic forecasts from AI and cloud infrastructure companies ignited sharp jumps in the Neo-Cloud sector, led by Corweave and Nevius Group stocks. Super Micro stock also recorded a sharp jump following a strong revenue forecast for the coming quarter and a record order backlog. The Roundhill Neo-Cloud ETF jumped by more than 17%, with all 14 of its stocks trading in the green.
The chip and hardware sector showed strong performance, the Philadelphia Semiconductor Index (SOX) jumped by about 2%, partly thanks to a favorable review from Goldman Sachs that raised price targets for Dell Technologies, NetApp, and HPE.
Last night, after the close of the trading day, communications and networking giant Cisco Systems reported record results for the fourth fiscal quarter, benefiting from an unprecedented boom in demand for AI infrastructure. The company's revenues jumped 18% to $17.3 billion (above the forecast of $16.8 billion), and the adjusted earnings per share stood at $1.22, above analyst forecasts. In addition, the company provided an especially aggressive forecast for the entire year 2027, with expected revenues of up to $73.4 billion, far above market forecasts, and an estimate that its revenues from AI infrastructure will jump to $7.5 billion. Despite the record results and the impressive forecast, Cisco stock weakened by about 4% in after-hours trading (this after it had jumped by about 63% since the beginning of the year).
In the Israeli stock sector, mixed trends were recorded: Riskified and BrainsWay jumped following strong reports and raised forecasts. Among the prominent stocks were Similarweb, which jumped, and Tower, which recorded a rise. Conversely, shares of Alpha Tau Medical, which trades for the first time on the Tel Aviv Stock Exchange tomorrow, Nayax, eToro, and Playtika Holding recorded declines. Among other stocks that stood out in trading, Okta, which fell despite an upgrade to a buy recommendation, and Wendy's, which jumped on reports of talks to take the company private.
Chief Investment Officer of UBS Global Wealth Management, Mark Haefele, notes that the bank remains positive regarding the equity asset class, supported by increased market participation and continued investments in the AI value chain worldwide, and recommends using the current strength to diversify the investment portfolio. "We remain positive regarding equities, supported by strong financial reports, broader market participation, and continued investments throughout the AI value chain, both in the US and globally," says Haefele, emphasizing that investors with concentrated exposure to American technology can consider using the rally in the markets to shift some investments towards Europe, Asia, and selected cyclical sectors.
Oil and FX
In foreign exchange trading, the dollar is trading stably against the shekel around the level of 2.9836 shekels (a slight rise of 0.04%), maintaining its position below the 3 shekel threshold and continuing the negative trend of August, during which it weakened by more than 3%.
The Dollar Index (DXY) is trading at a level of about 100.01 points (a slight rise of 0.19%), maintaining relative stability above the 100-point threshold. According to David A. Meier, an economist at Julius Baer, trends in the FX market in August show a new balance of power for the American currency. "The support provided by oil prices is fading, while recent US labor market data are leading markets to price out further interest rate hikes by the Federal Reserve," he says. Meier adds that "conversely, expectations for further monetary tightening by the European Central Bank (ECB) support the euro, which led Julius Baer to raise the euro/dollar forecast for three months to the level of 1.16. However, the dollar is not losing its strength completely. The Fed's hawkish stances, alongside point fluctuations in the AI sector, continue to maintain the currency's attractiveness as a safe-haven asset."
Oil prices are recording declines this morning, as Brent crude futures fall by 0.85% to the level of $88.25 per barrel, and US oil (WTI) futures also fall by 0.9% to the level of $82.53 per barrel. Growing concerns about supply disruptions received a tailwind from the worsening of the massive oil spill off the coast of Oman - from a tanker under sanctions containing about 800,000 barrels of Russian oil that ran aground and threatens a marine nature reserve in the area. At the same time, additional deadly attacks on vessels in the Gulf of Oman and the Red Sea increased volatility in the market. This is despite a report by the International Energy Agency (IEA) according to which global demand for oil is expected to fall this year beyond previous forecasts in the shadow of the closure of the Strait of Hormuz, with the agency noting that maritime disruptions and fighting continue to harm efforts to expand global supply.
Tel Aviv
Dual-listed stocks return to the Tel Aviv Stock Exchange with a positive weighted arbitrage gap of 0.63% on the TA-35 index (and a current theoretical impact of -0.26%), with the chip and technology sector leading the green trend. Among those prominent to the positive side are BrainsWay, which presents a positive gap of about 5.4%, Camtek and Gilat, which return with a positive gap of about 3.4%, ICL with a positive gap of about 2.3%, as well as Nice (1.1%) and Palo Alto (1.4%). Conversely, prominent declines are recorded in Ormat Technologies, which returns with a negative gap of about 2.6%, Tower (2.1%), Nayax (1.8%), Enlight Renewable Energy (1.6%), and Allot (3.0%). Among small-cap stocks, unusual arbitrage gaps are recorded, led by XTL, while Safe-T and Purple Biotech return with sharp negative gaps.
Yesterday, the Tel Aviv Stock Exchange closed trading in a mixed trend. The TA-35 index jumped by about 1.1%, while the TA-90 index lost about 0.6% of its value. The rise in the TA-35 index strengthened towards the end of the trading day, in view of the positive sentiment recorded on Wall Street, where the consumer price index showed that the annual inflation rate fell from 3.5% to 3.4%, in line with expectations.
Leading the gains was the technology index, which strengthened by about 1.1%, in view of the recovery recorded in the technology sector on Wall Street. Dual-listed stocks also stood out to the positive side: Camtek jumped by over 8%, and prominent gains were also recorded in stocks Nova, Cannon, and Gilat.
Also, the banking index stood out to the positive side and climbed by about 0.8%, following the strong reports published this morning by Bank Leumi. Net profit jumped by 8.5% to 2.83 billion shekels, a record figure for the bank, a rise compared to a net profit of 2.6 billion shekels in the same quarter last year. Return on equity stands at 16.3%, and here too it is an improvement compared to 16.2% in the same quarter last year.
Leading the declines among the sectoral indices is the construction index, which fell by about 2.4% and thus completes a decline of over 10% since the beginning of the month. Thus, the index is now on its way to its worst month since March 2025. In the background, a review by the Chief Economist at the Ministry of Finance showed that more than 4% of transactions for new apartments made in 2023 were canceled by buyers who could not meet the conditions. Also, the defense index and the TA-Income Abroad index fell by about 1.8% and 1.2%, respectively.
Leading the gains in the TA-125 index was OPC Energy stock, which jumped by over 10% following strong financial results for the second quarter. The company reported a net profit of $34 million - more than six times compared to that recorded in the same quarter last year. Revenues almost doubled, standing at $379 million.
Multi Retail stock jumped by nearly 38%, after the Kedma fund announced today the sale of control (70%) to businessman Ronen Ganon, one of the owners of the Zol Stock store chain.
Outlook and Risks
Something else worth knowing. The second-quarter reporting season is emerging as one of the strongest in recent years, with rare profit growth of over 30% among S&P 500 companies. Over 85% of companies beat forecasts - the highest rate since 2021. As Scott Rubner, head of equity strategy at Citadel Securities, noted to Bloomberg: "This is not just an AI story... The message from companies in the US is much simpler: profits are better than expected, and by a wide margin." However, the strong results create a paradox - the fear of a slowdown from this dizzying growth rate weighs on investors, and history teaches that when profit growth is above trend but slowing, the median 12-month return of the index falls to only 6.7%.
Obstacles on the way to 2027 include a high interest rate environment, stretched multiples, and an expected wave of AI IPOs. Ben Inker, co-head at GMO, warns that "if the positive turn continues, it is very likely to push up inflation and interest rates, and if it falters, companies are likely to disappoint." Similarly, Noah Weisberger, chief strategist at BCA Research, marks the bond market as the main source of concern and emphasizes that "given stretched multiples and a wave of IPOs that still needs to be absorbed at current valuation levels, it could cause, at some stage, investors to rightly choose not to pay peak multiples for peak profits."
Already, a moderate market reaction is evident. Companies like Western Digital and DataDog beat forecasts but their stocks fell, as Bloomberg Intelligence data shows that beating the forecast currently generates zero excess return. As Jill Carey Hall, a strategist at Bank of America, summarizes for Bloomberg: "Investors have already positioned themselves for the good news... Once stocks beat forecasts, the reward does not really translate into what, officially, you would expect to see."
