[NAV Forecast] WCM Next & World's Best: US Market Pulls Back on AI Stock Declines and Rising Oil Prices; WCM Burdened by Tech Weakness (Analysis as of 10/17)

Good morning, this is TOMMY_JUNE.

The US market today saw a renewed sell-off in AI-related tech stocks, triggered by a sharp decline in major AI cloud service provider CoreWeave. Additionally, concerns that surging oil prices would pressure stock valuations (P/E ratios) led to a pullback in major indices, with the Nasdaq Composite falling -2.15% and the S&P 500 dropping -1.11%. Conversely, defensive sectors such as energy and utilities saw gains. Against the backdrop of this market-wide risk-off sentiment and the decline in tech stocks, WCM Next Generation is facing strong downward pressure, while the diversified World’s Best is expected to maintain a slight gain.

1. Summary of NAV Forecast (Announced 10/17)

These are estimated values based on confirmed closing prices in overseas markets. WCM Next is expected to decline due to a significant negative impact from stock price factors (-1.16%), while World’s Best is expected to secure a gain compared to the previous day, with stock price factors contributing slightly positively (+0.10%).

2. Contribution Analysis (Stock Price Factors)

On a local stock price basis, results varied depending on the weighting of tech stocks.

■ WCM Next Generation

Although Siemens Energy (+1.98%) and Samsung Electronics (+2.62%) performed well, the sharp decline in Seagate Technology Hld. (-7.50%) and drops in Meta Platforms (-3.72%) and SharkNinja (-3.70%) dragged down the entire portfolio. The subtotal contribution of the top 10 holdings is negative (-0.63%).

■ World’s Best

Although Microsoft (-1.93%) and Medline (-1.67%) declined, defensive and financial stocks such as Coca-Cola Europacific Partners (+2.40%), AIA Group (+1.17%), and 3i Group (+0.86%) remained resilient, keeping the total contribution of the top 10 holdings slightly positive (+0.01%).

3. Deep Dive: Factors Behind Notable Stock Movements

Here is an explanation of the recent background for stocks that showed significant movement in last night’s market.

• Seagate Technology Hld. (STX) Change: -7.50%

  • 【Sympathy decline due to credit concerns in AI-related companies】 Against the backdrop of a sharp drop in corporate bonds of CoreWeave, which provides cloud services for AI, market concerns have risen regarding the profit-generating ability of AI infrastructure companies carrying significant debt. The company, which provides high-capacity storage (HDD) for data centers, also saw a significant decline as it was caught up in the broad sell-off of AI and technology-related stocks, making it the largest negative contributor (-0.27%) to WCM Next.

• Meta Platforms (META) Change: -3.72%

  • 【Caution ahead of earnings announcements and profit-taking】 Amidst a general decline in the Nasdaq, it appears that selling to adjust positions occurred ahead of the Q3 earnings announcements, which will begin in earnest next week. Following its role as a market leader, it was pressured by risk-off movements heading into the weekend.

• Microsoft (MSFT) Change: -1.93%

  • 【Weakness due to macro environment concerns】 While there are medium- to long-term expectations for demand for enterprise AI tools, concerns about reignited inflation due to rising oil prices and credit risk anxieties related to AI infrastructure acted as a drag, and it could not resist the overall weak market sentiment. It became the largest negative contributor (-0.08%) to World’s Best.

• Siemens Energy (ENR) Change: +1.98%

  • [Spillover of Energy Sector Strength] Benefiting from the energy sector becoming the top gainer in the US market due to the sharp rise in oil prices, the company, which is involved in power infrastructure, also showed a solid performance. It was the largest positive contributor within WCM Next (+0.14%), acting as a cushion in a falling market.

4. Today’s Summary: Investment Perspective

Today was a day marked by significant ‘risk-off’ sentiment, driven by concerns over credit risk in AI and tech-related stocks, sparked by CoreWeave’s sharp decline, combined with the macro factor of rising oil prices.

WCM Next was hit hard by the sharp decline in top-weighted tech and related stocks (Seagate, Meta, etc.), leading to a difficult result. On the other hand, World’s Best showed resilience against market volatility, supported by defensive stocks such as Coca-Cola Europacific Partners and financial-related holdings.

Starting next week, the third-quarter earnings season for large-cap stocks that influence market direction, such as Tesla and Meta Platforms, will begin in earnest. While analysts expect high profit growth, investors are also scrutinizing whether these companies can deliver returns that justify rising borrowing costs. Since market sentiment could shift drastically following earnings announcements, it is necessary to monitor developments with caution.

TOMMY_JUNE

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