Can chips rally without Big Tech?

00:00:00: The AI rally continues to power global equities higher, but the foundations beneath it are becoming increasingly questioned.

00:00:08: On one hand chip makers keep surging on expectations of relentless AR investment But on the other hand very companies financing that boom Are starting lose investors confidence raising a very uncomfortable question Can AI enablers keep climbing if hyperscalers eventually slow their spending?

00:00:27: So today is the last day of month and the last say off this quarter, The best quarter over past six years for global equities according to Bloomberg.

00:01:05: Ladies & Gentlemen.

00:01:06: And that despite Iran war.

00:01:08: Disrupted oil and fertilizer flows.

00:01:10: A spike in energy prices That led to a spike in global inflation expectations Which in some parts of world lead interest rate hikes already In others to hawkish monetary policies.

00:01:22: Regardless Global Equities were boosted by AI build out.

00:01:26: Of course, the indices that have little exposure to technology were left behind and a pretty narrow market breadth is raising a few eyebrows.

00:01:34: but the rally continues despite an eye-watering volatility especially for Korean Cosby Index And quite unusually high valuation specially for chip makers.

00:01:44: The Korean Cospy index was down yesterday before the announcement of massive investment in new Check fabs is up by two point forty percent today.

00:01:54: The Nikkei in Japan is slightly in the positive as well, while US stock market that started with a week on strong footage are looking bullish this morning judging by rising S&P and NASDAQ futures at.

00:02:09: But note that not all technology stocks are performing well.

00:02:13: The AI enablers, including chip makers which are the beneficiaries of massive AI spending or outperforming while big technology so they ones that ARE spending on AI infrastructure are sputtering!

00:02:26: The Magnificent Seven is down by nearly fifteen percent for example since May peak with Microsoft losing more than a third office value since October last year.

00:02:38: being pressured on both ends.

00:02:40: On one hand, it's massive AI spending displaces investors and on the other hand is software business as seen pressured by AI.

00:02:48: now Microsoft still guys cloud segment Azure.

00:02:51: that should continue to grow along with AI adoption in theory but investors are jumping out today.

00:02:57: another stellar a I play Google member.

00:03:00: google is down by seventeen percent since this may peak as well And that despite his Gemini model which has quite appreciated despite its TPU chips, which are very good for inference.

00:03:11: And despite it's data center business.

00:03:13: Google cloud or Google has everything to benefit from AI adoption on paper.

00:03:17: but a lot is being pressured today by investors reluctance on extra spending metal.

00:03:23: and the other hand is down by nearly thirty percent since last focus because this just doesn't have a leading AI model nor a clear plan of their then overloading social media platforms with AI generated content while Amazon is all Also down by nearly nineteen percent since it's May peak.

00:03:40: It also spans massively on its AI infrastructure, data center and chips.

00:03:46: Do you see where I'm coming?

00:03:47: The massive AI spending from the so-called hyperscalars has allowed companies like NVIDIA, Micron, Samsung, SKINX and the likes to print mind blowing rallies over past months.

00:04:01: But investors are seemingly no longer happy with this spending – they're pulling their money back!

00:04:05: And a whole could eventually be filled in by other companies as many sectors today do see productivity gains AND invests.

00:04:16: The problem is, their spending could be nowhere near the same speed than the big technologies.

00:04:22: I mean we are talking about eight hundred billion to up to a trillion US dollars' spending this year alone!

00:04:27: Now good news as hyposcalers still have the ball markets who feel spending for awhile but bad news eventually.

00:04:34: if funding becomes difficult and investors not happy then they will have to slow down.

00:04:40: And after Big Technologies massive AI Spending slows... Even a little bit, the future revenues as predicted by market investors for AI enablers will drop.

00:04:53: And higher deals?

00:04:55: The bigger potential downside correction!

00:04:58: In summary, I'm not very sure today that the chip rally could continue at this speed without the precious support of the big technology.

00:05:05: If Big Technology sneezes The whole supply chain will eventually catch a cold.

00:05:10: But anyway That's just an unpleasant thought for this sunny June morning.

00:05:14: Good news is that the US could rebound it Just like yesterday following the weekend tensions in the Middle East And holes near to seventy dollar per barrel level despite another wave Of conflicting news.

00:05:25: Donald Trump says appease talks in Dahar today, while Iranians say they will not.

00:05:31: And the Middle East tensions don't matter for global risk appetite if oil prices remain contained.

00:05:35: and For now They do remain contain mostly because of over supply parts of the Oil market as a result of historic strategic reserve releases and also oil tankers sailing through this straight-off home is undercover.

00:05:49: But the problem is, The US and Iran peace deal may not be as easily inked.

00:05:54: The traffic in the straight-off homes could slow down again And this time around, the tragic reserves will be alarmingly low.

00:06:01: to keep investors at peace of mind regarding a prolonged conflict In the Middle East.

00:06:07: As such, the seventy dollar per barrel level for U.S.

00:06:10: crude Could act as floor To the latest retreat in oil prices And upside pressures could flare up Again if this week doesn't bring any... If so, the question would be who will carry the market higher?

00:06:33: I guess we will see, but there is more optimism than pessimism in the market today.

00:06:37: So The US dollar has better bid against most majors and metals this morning!

00:06:41: The euro-dollar which raised yesterday's gaze at its pushing below the one fourteen mark this morning... ...the sterling dollar is dealing with political uncertainty as Andy Byrne is disclosing his plans about how he would put Britain on it's feet again while while keeping fiscal discipline tight.

00:06:59: The good news for him is that the guild markets haven't gone against Burnham just yet, but the bad news is speaking rather easier than generating faster growth in an economy that has become increasingly dependent on government spending.

00:07:14: I would say that Burnham's cabinet picks could reverse their early confidence and Guild Markets quite rapidly.

00:07:18: when investors come to realize with little spending without too much help from the government will be tough.

00:07:30: In Japan, the dollar yen spike passed a one hundred and sixty-two level as everybody is holding his or her breath to see when Japanese officials intervene if they do.

00:07:40: The likely reason why there are not intervening today is slow pace of depreciation off the yen against US dollars global dominance.

00:07:49: Indeed, today DN is being sold quite slowly and that's because the rate differential between US and Japan remains in favor of USD.

00:07:58: That means that intervening today will change nothing to the market direction.

00:08:04: it'll just cost money.

00:08:05: So unless we see aggressive sell-off in the Japanese yen, The Japanese officials are seemingly willing to sit still.

00:08:10: And finally gold is gently clearing the critical four thousand dollars support this morning To the downside!

00:08:16: The yellow metal has now stepped into the medium term bearish consolidation zone below the forty one fifteen dollar per ounce level which Is a major thirty eight point two percent Fibonacci retracement on October twenty three to January twenty six rally Suggesting that a deeper pullback in yellow metal prices is possible.

00:08:36: The next target for the gold bears stand at a US dollar per ounce level, which has long-term uptrending base and the fifty percent retracement.

00:08:45: And pulling back to this level doesn't even mean that Gold's long term positive trend will be damaged.

00:08:51: For long-term investors, gold remains an interesting asset.

00:08:54: Remember especially many central banks have sold their gold holdings during the last quarter to counterweight the energy price spike and they will be replenishing their reserves again.

00:09:05: so we know that demand will be there but we don't now at what price just yet.

00:09:10: So this is all for this Tuesday.

00:09:13: I'm Yipega Skardishkaya And thank you for joining me.

00:09:16: Thank you for your beautiful and supportive comments!

00:09:20: This episode of Market Talk has been helpful and it's been insightful to you.

00:09:25: So please, do not hesitate to leave your comments, reactions and questions below as usual!

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00:09:51: So I will meet again tomorrow!

00:09:54: And until then, good day trading!