Oil Prices Surge More Than 30% This Month, Adding Pressure to Stocks Despite Expanded AI Investment

[Financial News] Even as big tech companies are actively investing in artificial intelligence (AI) infrastructure, semiconductor stocks are struggling as concerns about excessive AI investment grow. In particular, soaring oil prices driven by geopolitical risks are adding to downward pressure on the stock market by increasing expectations of higher interest rates.
On the 24th, the Korea Exchange said the KOSPI closed at 6,690.62, down 406.27 points, or 5.72%, from the previous session. Samsung Electronics (-7.59%) and SK hynix (-8.34%) plunged, dragging the index lower.
Recently, Alphabet Inc., Google’s parent company, announced that it would expand its capital expenditures (CAPEX) on AI facilities, boosting expectations that semiconductor demand will remain solid. At the same time, however, concerns about overinvestment have also emerged. The question is whether big tech companies can keep funding AI investment as cash reserves shrink under heavy spending.
In fact, Alphabet raised its capital spending guidance for this year, but its free cash flow to the firm (FCF) has turned negative. In the second quarter, FCF posted a deficit of $5.86 billion due to large-scale investments in AI and other areas. This is the first time Alphabet has recorded negative FCF since its IPO in 2004.
Still, analysts say big tech companies cannot easily cut investment as competition to build AI infrastructure accelerates. They expect AI spending to continue, which should keep semiconductor demand firm.
Lee Eun-taek, an analyst at KB Securities, said, "Even if FCF turns negative, it is doubtful that investment would stop immediately." He added, "In the past, Amazon and Meta endured long-term investments and bold infrastructure expansion despite losses, creating the winners we see today. It will be difficult to stop capital spending now."
Lee Jae-won, an analyst at Yuanta Securities Korea, also noted, "Given that customer demand exceeds supply capacity, no real change has been confirmed to support claims that AI investment has peaked or that semiconductors have already reached a high point."
The surge in international oil prices, driven by heightened geopolitical tensions in the Middle East, is also weighing on stocks. On the 23rd local time, Brent Crude Oil futures on the Intercontinental Exchange (ICE) settled at $100.69, up 7.04% from the previous session. West Texas Intermediate crude oil (WTI) futures on the New York Mercantile Exchange rose 6.17% to $92.19. So far this month, Brent Crude Oil has jumped 38.03%, while WTI has climbed 32.65%.
Kim Seong-geun, an analyst at Mirae Asset Securities, said, "This month, the stock market has focused on concerns over AI capital expenditures and the threat from Chinese tech firms, but oil prices are now reemerging as a key variable." He added, "As inflation worries are likely to intensify due to higher oil prices, a cautious approach to the stock market appears necessary for the time being."
However, some say the risk of geopolitical escalation remains limited. Yoo Seung-min, an analyst at Samsung Securities, said, "Instability in the Strait of Hormuz and the resulting rise in oil prices and interest rates are burdensome, but I believe the likelihood of the United States and Iran resuming full-scale war is slim." He added, "With the U.S. midterm election approaching in November, President of the United States Donald Trump is likely to seek stability."

[email protected] Seo Min-ji Reporter