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SUMMARY
Amit Kukreja provides a comprehensive analysis of the latest market developments, focusing on the impact of a sharply higher U.S. Producer Price Index (PPI), standout AI and semiconductor earnings, and a high-profile U.S. business delegation to China. The discussion covers sector rotations, macroeconomic risks, and the evolving narratives driving technology and energy stocks.
MAIN POINTS
- U.S. PPI data comes in significantly above expectations, triggering a sharp market reversal in pre-market trading.
- Nebius reports a blowout quarter, beating revenue and EBITDA estimates, and raises its contracted power and capex guidance.
- Alibaba misses on both earnings and revenue, highlighting ongoing challenges for major Chinese tech firms.
- Jensen Huang of Nvidia is confirmed to be traveling to China with other U.S. business leaders, fueling optimism for U.S.-China business relations.
- Amit discusses his recent purchases of Corning and AAI, citing strategic deals and sector positioning.
- Semiconductor stocks are observed to be moving in tandem, with sector-wide reversals and correlations highlighted.
- Market opens with major AI and semiconductor stocks rebounding, while software and fintech lag behind.
- Anthropic is reported to be raising capital at a $900 billion valuation, reflecting intense investor interest in AI infrastructure.
- Discussion of emerging small-cap AI infrastructure and memory plays, including Pang, Wolf Speed, and Digi Power, with warnings about volatility and risk.
- Analyst skepticism about Micron's long-term earnings growth is contrasted with bullish scenarios for continued AI-driven demand.
- Morgan Stanley and Bank of America raise S&P 500 and Nvidia price targets, citing ongoing AI capex momentum.
- Oil prices surge and energy stocks rally, while fintech and software remain under pressure amid sector rotation.
- Amit notes the synchronized movements of semiconductor stocks, reinforcing the thesis of sector-wide momentum and risk.
- Debate continues on what could trigger a rotation from semiconductors to software, with capex growth and valuation concerns discussed.
- Microsoft announces layoffs at LinkedIn, joining other major tech firms in workforce reductions.
- Meta faces employee pushback over new productivity tracking software, reflecting broader tech workplace tensions.
- Market participants debate whether current volatility is a pause before Nvidia earnings or a sign of broader sentiment shifts.
- Wolf Speed and Nebius receive mainstream coverage as key AI infrastructure plays, with Wolf Speed highlighted as a high-risk turnaround story.
- Brian Armstrong of Coinbase expresses optimism about the Clarity Act's progress in Congress, which could impact crypto regulation.
- Cerebras prepares for a high-profile IPO, positioning itself as an alternative to Nvidia in AI inference hardware.
- Copper and silver prices rally alongside AI infrastructure demand, while rare earth stocks lag despite their supply chain importance.
- Nvidia, Tesla, and Rocket Lab reach new highs, providing significant boosts to technology-focused portfolios.
- Amit attributes the semiconductor rally to both earnings momentum and hyperscaler capex increases, noting historical differences from the dot-com era.
- Congress debates a potential suspension of the federal gas tax to address high fuel prices, raising concerns about infrastructure funding.
- Discussion turns to the potential for compute futures markets and the impact on AI-related equities.
- Dan Niles warns of a potential 30-50% correction in AI and semiconductor stocks in 2027, citing concentration risks and cyclical concerns.
- Market continues to ignore negative macro data, focusing instead on AI earnings growth and sector-specific narratives.
DETAILED ANALYSIS
The trading session opened under the shadow of a sharply higher U.S. Producer Price Index (PPI), with headline inflation at 6% versus expectations of 4.9%. This marks the worst PPI print since 2022, evoking memories of the inflationary shocks that began Amit Kukreja’s coverage of the market open.
The market’s initial reaction was a swift reversal from strong pre-market gains, as investors digested the implications of a 1.5% gap between expectations and reality. Energy prices, particularly oil at $102.70 per barrel, were identified as the primary driver of the inflation surprise, with the ongoing war in the Middle East cited as a key factor.
Despite the inflation shock, the market’s focus quickly shifted to the resilience of the AI and semiconductor sectors. Nebius delivered a standout earnings report, beating revenue estimates with $399 million versus $388 million expected and achieving 684% year-over-year growth. The company raised its contracted power outlook from 3 to 4 gigawatts and reaffirmed its adjusted EBITDA guidance despite higher capex, signaling robust demand for AI infrastructure.
Nebius’ rapid expansion, including the announcement of a second gigawatt-scale data center in the U.S., positions it as a leading full-stack neocloud provider. The company’s management, led by Roman, has garnered praise for its transparent communication and strategic acquisitions, further boosting investor confidence.
Other semiconductor names mirrored Nebius’ momentum. Micron, Corning, Intel, and AMD all experienced significant pre-market volatility, with prices rebounding sharply from previous lows. The sector’s synchronized movements were attributed to both macroeconomic factors and the collective impact of AI-driven capex.
Intel’s partnership announcements with Google and SpaceX, as well as AMD’s recovery from recent declines, underscored the sector’s resilience. The discussion highlighted the increasing correlation among semiconductor stocks, with Amit noting that bullishness on one often implies bullishness on the entire group. This dynamic was likened to the behavior of precious metals, where gold, silver, and copper often move in tandem regardless of individual fundamentals.
The AI narrative extended beyond earnings, with Anthropic reportedly raising funds at a $900 billion valuation and Andreessen Horowitz securing $5 billion at a $60 billion valuation. These capital raises reflect the insatiable demand for AI infrastructure and the willingness of investors to fund the next wave of technological innovation. Small-cap names such as Pang, Wolf Speed, and Digi Power were identified as emerging plays in memory and power infrastructure, though Amit cautioned that these stocks are highly speculative and better suited for short-term trades than long-term investments.
Wolf Speed, in particular, was highlighted as a binary turnaround story, having emerged from bankruptcy with valuable silicon carbide assets for EVs and data centers.
The market’s attention also turned to geopolitical developments, as a high-profile U.S. business delegation, including Jensen Huang of Nvidia and Elon Musk, traveled to China alongside President Trump. The trip, which was initially shrouded in uncertainty regarding CEO participation, was seen as a potential catalyst for improved U.S.-China business relations and possible tariff relief. Reports indicated that last-minute dealmaking and the prospect of a formalized “board of trade” structure could provide much-needed stability to bilateral economic ties.
The presence of American technology leaders was interpreted as a signal of the importance of business diplomacy in navigating global supply chain and regulatory challenges.
Sector rotation remained a persistent theme throughout the session. While AI and semiconductor stocks surged, software and fintech names lagged, with companies like Wix and Shopify experiencing steep declines despite solid fundamentals. The lack of a compelling narrative for software, aside from valuation, was cited as a barrier to rotation, with investors preferring to allocate capital to sectors with clear bottlenecks and growth stories.
The discussion explored potential triggers for a rotation, such as a slowdown in AI capex growth or a significant correction in semiconductor valuations, but concluded that no immediate catalyst was apparent.
Macroeconomic risks continued to loom large. The U.S. 10-year Treasury yield approached 4.5%, and the 30-year exceeded 5%, raising concerns about the sustainability of current equity valuations. The possibility of a rate hike, persistent inflation, and the impact of high energy prices were all discussed as potential headwinds.
Congress debated the suspension of the federal gas tax for the first time since its creation in 1932, with lawmakers weighing the trade-off between consumer relief and infrastructure funding. The debate extended to proposals for windfall taxes on oil companies, reflecting broader political tensions over energy policy and inflation.
Crypto markets also featured in the analysis, with Coinbase CEO Brian Armstrong expressing optimism about the bipartisan progress of the Clarity Act in Congress. While the legislation could provide regulatory clarity for digital assets, Amit noted that Bitcoin’s performance remains closely tied to macro liquidity conditions rather than serving as a straightforward inflation hedge.
The upcoming IPO of Cerebras, a company specializing in AI inference hardware, was positioned as a potential disruptor to Nvidia’s dominance. Cerebras’ vertically integrated model and use of large, on-chip SRAM to bypass traditional memory bottlenecks were highlighted as key differentiators. However, the company’s heavy revenue concentration in a few customers and the competitive response from Nvidia, including its acquisition of Groq, were identified as risks.
The discussion underscored the ongoing innovation race in AI hardware and the potential for shifts in memory and inference architectures to impact established players like Micron.
Commodities such as copper and silver rallied in tandem with AI infrastructure demand, though rare earth stocks lagged despite their critical role in the supply chain. The divergence was attributed to market focus on immediate bottlenecks rather than upstream inputs, though Amit indicated plans to further research the rare earth sector.
Throughout the session, Amit emphasized the importance of understanding sector dynamics, macroeconomic risks, and the narratives driving capital flows. He advocated for a cautious yet opportunistic approach, recognizing the potential for both continued melt-up in AI and semiconductor names and the risk of sharp corrections if earnings momentum falters or macro conditions deteriorate. The analysis concluded with a reminder that market sentiment remains highly sensitive to both earnings surprises and geopolitical developments, with the next catalysts likely to emerge from Nvidia’s upcoming earnings and further news from the U.S.-China business summit.
LINKS
- Amit Kukreja's Twitter/X profile for market commentary and updates.
- Amit's Deep Dives Substack for in-depth stock and sector research articles.
- Registration link for Amit Kukreja's Singapore meetup event.