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SUMMARY
Amit Kukreja delivers a comprehensive analysis of the market open on July 22nd, covering major developments in semiconductors, AI, and global politics. Key topics include the AMD-Anthropic partnership, Jensen Huang's comments on Chinese AI models, earnings from major tech firms, and escalating tensions in the Middle East impacting oil prices.
MAIN POINTS
- AMD and Anthropic announce a multi-billion dollar deal for AI servers and data center capacity, with AMD investing $5 billion in Anthropic.
- Semiconductor stocks decline in the pre-market despite positive news, with oil prices surging to $86 per barrel amid geopolitical tensions.
- Software sector faces pressure as companies like IBM and Pega Systems warn about shifting IT budgets toward cybersecurity due to increased threats.
- Former President Trump issues a statement threatening retaliatory strikes on Iranian infrastructure if attacks on ships continue, further escalating Middle East tensions.
- Jensen Huang addresses concerns about Chinese AI models, emphasizing the importance of open-source models and dismissing fears of security risks.
- OpenAI plans a $30 billion data center in Georgia, projecting $750 billion in compute spending by 2030 and signaling a shift toward in-house infrastructure.
- Rocket Lab secures a $266 million U.S. Air Force contract, adding to its defense sector momentum despite broader market volatility.
- SMCI stock surges after reporting record backlogs and a dramatic increase in gross margins, raising questions about pricing power and industry dynamics.
- Reddit's stock drops as it signals a potential end to its data licensing deal with Google, reflecting broader challenges for publishers amid AI-driven changes to search traffic.
- Google launches new Gemini AI models but faces competitive pressure from Meta and others, with investors focusing on remaining performance obligations (RPO) and cloud growth.
- Anthropic doubles its midterm lobbying spend to $40 million to influence AI regulation, aiming to limit open-source proliferation for competitive reasons.
- AT&T and GE Veronova report mixed earnings, with AT&T beating expectations and GE Veronova missing on EPS, highlighting sector-specific risks.
- CrowdStrike and Cerebras announce a partnership to enhance AI-powered cybersecurity, reflecting the sector's response to rising threats.
- Data center and server providers like Dell and HPE benefit from SMCI's margin expansion, while software names continue to underperform.
- Short interest in U.S. equities reaches its highest level since 2010, indicating widespread hedging and market caution.
- Divergence emerges between crypto assets as Ethereum and BMR move independently of Bitcoin, while defense and AI infrastructure stocks rally.
- Software companies with perceived weak moats, such as Path, face steep declines as AI features threaten their core offerings.
- Semiconductor stocks recover from pre-market lows, with Micron flipping green and SMH turning positive, as hedge funds exploit sector rotations.
- Consumer credit and spending data from Capital One and others show resilience, with regional housing markets like Florida and the Midwest remaining strong.
- JPMorgan's AI analyst highlights the broadening of market leadership beyond tech, while warning that AI capex and inflation remain key risks.
- Sandbox AQ CEO discusses the significance of recent AI infrastructure deals, the growing threat of AI-driven cyberattacks, and the rise of Chinese open-source models.
- Iran responds to U.S. threats by warning of reciprocal attacks on regional infrastructure, escalating the risk of direct conflict and oil supply disruptions.
- Apple announces a full overhaul of its Mac lineup to meet AI demand, reflecting a broader industry shift toward AI-optimized hardware.
- Stephanie Link explains her bullish stance on Micron and Nvidia, citing structural shortages in memory and compute, while expressing caution on SpaceX valuations.
- Nvidia rallies to its highest level in nearly two months, driven by renewed momentum in the semiconductor sector and anticipation of Google earnings.
- Senator Elizabeth Warren and Ambassador Greer debate the economic impact of tariffs and the legality of recent trade measures, with implications for consumer prices.
- Audience poll anticipates an increase in Google's capex guidance, with market participants closely watching for signals affecting AI and semiconductor stocks.
- The session concludes with a preview of upcoming earnings from Google, Tesla, IBM, and Service Now, setting the stage for further market-moving developments.
DETAILED ANALYSIS
The trading session on July 22nd was marked by a convergence of major corporate, technological, and geopolitical events, all of which contributed to heightened volatility and shifting investor sentiment. The day began with the announcement of a landmark partnership between AMD and Anthropic, in which Anthropic committed to purchasing up to 2 gigawatts of AMD’s next-generation MI450 chips starting in 2027. AMD also agreed to invest $5 billion in Anthropic, joining the ranks of major tech players seeking to secure a foothold in the rapidly expanding AI infrastructure market.
Despite the scale of the deal, AMD’s stock reaction was muted, reflecting both the market’s anticipation of the agreement and broader sectoral headwinds affecting semiconductors.
The semiconductor sector, which had enjoyed a strong rally the previous day, saw a reversal in pre-market trading. This pullback was attributed to a combination of profit-taking, elevated oil prices, and rising bond yields. Oil surged to $86 per barrel, driven by renewed hostilities in the Middle East, including U.S. strikes and threats of escalation from both the United States and Iran.
Former President Trump’s public warning that any further Iranian attacks on ships in the Strait of Hormuz would trigger U.S. strikes on Iranian infrastructure added to the geopolitical risk premium, pushing oil even higher and raising concerns about potential disruptions to global energy supplies.
Jensen Huang, CEO of Nvidia, addressed the industry’s concerns regarding the proliferation of Chinese AI models, specifically Kimmy K3. Huang emphasized the necessity of both open and closed models for scientific progress, cybersecurity, and economic security. He dismissed fears that American companies using Chinese models would be vulnerable to backdoors, clarifying that these models can be downloaded, fine-tuned, and secured locally.
Huang’s comments suggested that the market had overreacted to the perceived threat of Chinese open-source models, drawing parallels to previous misunderstandings around DeepSeek. He argued that the availability of high-quality open models would ultimately drive greater adoption of AI, benefiting the entire infrastructure ecosystem, including Nvidia and its competitors.
The day also saw significant developments in AI infrastructure spending. OpenAI announced plans to build a $30 billion data center in Georgia, with a projected $750 billion in compute spending through 2030. This marks a strategic shift from relying solely on cloud providers to designing and developing proprietary infrastructure.
The scale of these commitments underscores the industry’s expectations for exponential growth in AI workloads, but also raises questions about the sustainability of such investments and the need for corresponding revenue growth to justify them.
Rocket Lab’s $266 million contract with the U.S. Air Force highlighted the ongoing expansion of defense-related technology spending, while SMCI’s report of record backlogs and a dramatic increase in gross margins signaled shifting dynamics in the server and data center market. SMCI’s ability to double its gross margins in just 90 days was attributed to a combination of strong demand, potential pricing power, and possibly new product mixes.
This development had a positive spillover effect on peers like Dell and HPE, as investors speculated that similar margin improvements could be realized across the sector.
The software sector, by contrast, faced renewed pressure. Companies such as IBM and Pega Systems warned that enterprise IT budgets were being redirected toward cybersecurity in response to rising threats, particularly those associated with advanced AI models like Mythos. This trend weighed on software stocks, with concerns that Service Now and other SaaS providers could face similar headwinds if customers continue to prioritize security spending over traditional software investments.
The divergence between software and semiconductor stocks became a recurring theme, with hedge funds reportedly exploiting the rotation through sector-specific long-short strategies.
Reddit’s stock fell sharply after reports that it might cancel its data licensing deal with Google, a move that reflects broader industry challenges as AI-driven search features reduce referral traffic to publishers. The market’s reaction suggested concerns about Reddit’s ability to monetize its data, though some argued that Reddit holds significant leverage given the value of its user-generated content for AI training. Similar dynamics are playing out across the publishing industry, with outlets like USA Today and Politico experiencing steep declines in organic search traffic as AI summaries become more prevalent.
Google’s launch of new Gemini AI models and the ongoing competition with Meta and other tech giants kept investor attention focused on remaining performance obligations (RPO) and the growth trajectory of cloud businesses. Analysts highlighted the importance of tracking RPO as an indicator of future revenue, while also cautioning that much of the recent growth in RPO at companies like Microsoft was driven by large, concentrated customers such as OpenAI. This raised questions about the durability and diversification of cloud revenue streams.
Anthropic’s decision to double its midterm lobbying spend to $40 million underscored the high stakes in the regulatory battle over AI. The company, along with other major developers, is seeking to influence policy in ways that would limit the proliferation of open-source models, citing safety concerns. This aligns with the interests of hyperscalers and closed-model providers, who stand to benefit from regulatory barriers to open-source alternatives.
The debate over the safety and competitiveness of open versus closed models is likely to intensify as the industry matures.
Earnings reports from AT&T and GE Veronova provided a mixed picture of the broader economy. AT&T beat expectations on both EPS and revenue, while GE Veronova missed on EPS despite raising its revenue guidance. The latter’s decline was attributed to a sharp drop in wind revenue, highlighting the risks facing even well-positioned “picks and shovels” players in the AI and energy transition.
The session also featured notable partnerships in cybersecurity, with CrowdStrike and Cerebras teaming up to enhance AI-powered threat detection and response. This reflects the sector’s adaptation to the growing use of AI in both offensive and defensive cyber operations, as evidenced by recent incidents involving OpenAI, Hugging Face, and Chinese open-source models. The rapid evolution of AI-driven cyber threats has prompted calls for more robust, military-grade air-gapping and cross-industry collaboration to mitigate risks.
Consumer data from Capital One, JP Morgan, and others indicated continued resilience, with delinquency rates, payment rates, and spending growth all remaining healthy. Regional housing markets, particularly in Florida and the Midwest, showed strength, and aggregate consumer credit declined slightly for the first time in two years. These trends suggest that, despite anecdotal concerns about inflation and rising costs, the U.S. consumer remains a pillar of economic stability.
JPMorgan’s AI analyst noted a broadening of market leadership beyond the “Mag 7” tech giants, with industrials, utilities, and financials contributing to earnings growth. However, the analyst warned that a pullback in AI infrastructure spending or a resurgence of inflation could pose significant risks to the market. The consensus among major banks has shifted from expecting rate cuts to anticipating a prolonged hold by the Federal Reserve, given persistent inflationary pressures and elevated oil prices.
Geopolitical developments continued to loom large over the market. Iran’s response to U.S. threats included warnings of reciprocal attacks on regional infrastructure, raising the specter of direct conflict and further oil supply disruptions. The ongoing standoff in the Strait of Hormuz, coupled with Pakistan’s request for $10 billion in financial support after mediating talks, underscored the complexity and interconnectedness of global energy and security dynamics.
Apple’s announcement of a comprehensive overhaul of its Mac lineup to accommodate AI workloads highlighted the accelerating demand for AI-optimized hardware across the industry. This move is consistent with broader trends in enterprise and consumer technology, as companies race to upgrade infrastructure in anticipation of the next wave of AI applications.
Stephanie Link’s bullish outlook on Micron and Nvidia was rooted in the belief that structural shortages in memory and compute would drive sustained pricing power and earnings growth. She contrasted these names with SpaceX, which, despite its AI data center ambitions, trades at a much higher valuation relative to its fundamentals. The debate over cyclicality in memory markets remains unresolved, with investors awaiting further earnings confirmation before fully re-rating stocks like Micron.
Nvidia’s stock rallied to its highest level in nearly two months, buoyed by sector momentum and anticipation of Google’s upcoming earnings. The market’s focus shifted to Google’s capex guidance, with participants expecting an increase that would signal continued investment in AI infrastructure and benefit semiconductor suppliers. The nuanced interplay between capex, RPO, and revenue growth at major tech firms remains a central theme for investors.
The session concluded with a spirited debate between Senator Elizabeth Warren and Ambassador Greer over the economic impact and legality of tariffs, as well as a preview of key earnings from Google, Tesla, IBM, and Service Now. The outcome of these reports is expected to set the tone for the next phase of market action, with implications for AI, semiconductors, software, and the broader macroeconomic environment.
LINKS
- Amit Kukreja's Twitter/X profile for market commentary and updates.
- Amit's Deep Dives Substack for in-depth financial analysis and research.
- Free news terminal offering real-time earnings and market news.