MPC Markets Morning Call — 2 July 2026: Chips Crack as AI Efficiency Fears Hammer SOX 6%

Wall Street kicked off the second half on the back foot, with the S&P 500 slipping 0.2% to close at 7,484.47, the Nasdaq Composite shedding 0.7% to 26,040.03, and the Dow finishing just under the flatline at 52,306.22. The headline-grabber was the Philadelphia Semiconductor Index, which plunged 6.3% in its sharpest single-session drop since the AI trade went mainstream. AMD fell 6.9%, Intel dropped 9%, Nvidia lost 1.3%, and equipment names like Applied Materials, Lam Research, Micron and SanDisk fell 10% or more.

The catalyst was a report from The Information that OpenAI engineers had unlocked software optimisations capable of slashing inference costs in half. Applied specifically to ChatGPT traffic from non-logged-in visitors, the techniques reduced GPU requirements to what the outlet called a “shockingly small” couple of hundred Nvidia chips. The exact methods remain undisclosed, though quantisation, key-value caching, batch processing and model routing were cited as possibilities. Semiconductors had reached a record 19.7% weighting in the S&P 500 by late June — nearly four times their 5% share in mid-2020 — so the demand-erosion narrative landed on an index that was unusually exposed to chip sentiment.

Meta was the standout in the other direction, surging 8.8% after Bloomberg reported the company was building a cloud business to sell excess AI computing capacity under an internal segment called Meta Compute. The dual-pronged approach covers model-as-a-service (hosting AI models for developers) and raw bare-metal compute sales in direct competition with AWS, Azure and Google Cloud. Nike also reversed an early decline to close 5.1% higher after fiscal Q4 revenue topped expectations, though CEO Elliott Hill warned the turnaround effort in China still has “large hurdles to overcome.” Steve Sosnick at Interactive Brokers noted: “Stocks are taking a well-deserved breather after a rip-roaring second quarter — the selling is mostly tech focused, with NDX down more than 1% and SOX down more than 6%.”

Global Stock Indices — 1 July 2026. S&P 500 −0.2%, Nasdaq −0.7%, Dow flat.

Fed Chair Kevin Warsh made his international debut at the ECB’s annual forum in Sintra, Portugal, and delivered a message that calmed bond markets. “Expectations of inflation over the first four weeks of this period have come down, inflation risks have come down,” he told the panel. Two-year Treasury yields dropped to session lows around 4.15% on the remarks. Warsh doubled down on his refusal to provide forward guidance, telling the moderator she was “trying to get me to break this rule — she’s going to fail.” He said the FOMC was ready for “a good family fight” when it meets on July 28–29.

Krishna Guha at Evercore read the comments as a sign the new Fed chair “does not currently see cause for an immediate hike” while keeping all options open meeting by meeting. Half of the 18 FOMC officials projected a rate increase this year in their June dot plot, but Warsh declined to offer a forecast himself. The benchmark rate remains at 3.5%–3.75%, and markets are pricing at least one 25 basis-point rise by year-end. On AI, Warsh said the current investment surge would ultimately spur a supply-side boom that drives productivity: “We are in the first or second inning of this revolution. This is a big paradigm shift.”

On the geopolitical front, US negotiators Steve Witkoff and Jared Kushner held what a senior administration official described as “positive discussions” in Qatar, with technical talks in Doha focused on resuming traffic through the Strait of Hormuz, releasing frozen Iranian assets, and securing a lasting ceasefire based on the 14-point interim accord signed last month. Both sides remain at odds over the strait — Washington claims it is now open to shipping, while Tehran insists on retaining some control. President Trump told reporters: “The denuclearization of Iran is moving along well. They’ve had very good meetings.” Mohit Kumar at Jefferies struck an optimistic note: “It’s likely to be more of a fudge. But as long as the Strait remains open and oil keeps flowing, the market is likely to get de-sensitised around geopolitics.”

Strait of Hormuz vessel crossings — traffic recovering from lows hit during the Iran conflict.

Oil prices retreated as the constructive tone from Doha talks eased supply-disruption fears. WTI crude settled down 0.7% at $68.13 a barrel, while Brent also fell roughly 1.4%. The slide continues a broader unwind from the $110+ levels hit earlier in the year when Iran’s effective closure of the Strait of Hormuz choked global tanker flows. Mohit Kumar at Jefferies argued the market would increasingly “get de-sensitised around geopolitics” provided the strait stays open and oil keeps flowing, even without a comprehensive peace deal.

Elsewhere, UBS flagged an improving risk-reward setup in gold mining stocks following a roughly 25% correction in the spot price and a 35%+ drop in the GDX index from their peaks. The bank said key drivers of the recent bull market — central bank accumulation, rising sovereign debt burdens and monetary de-dollarisation — remain intact and will continue to underpin medium-term demand. UBS trimmed price targets but named six picks: Newmont and Barrick among large caps, Endeavour Mining and SSR Mining in the mid-tier, Skeena Resources as a junior developer, and Franco-Nevada as the preferred streamer.

Spot gold firmed 0.2% to $4,037.39 an ounce, supported by Warsh’s softer inflation rhetoric and dollar weakness. The Bloomberg Dollar Spot Index rose 0.2% but the yen rebounded from 40-year lows near 162.57 per dollar after days of speculation about possible intervention. The Aussie dollar was unchanged at $0.6893. The euro held at $1.1378. Bitcoin rose 1.1% to $60,750.05.

UBS top gold mining picks — risk/reward improving after 25% gold price correction and 35%+ GDX drawdown.

Apple is in active negotiations to buy memory chips from two Chinese semiconductor manufacturers on a Pentagon blacklist — ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies (YMTC) — as the company scrambles to secure supply amid a global memory crunch driven by the AI boom. Standard DRAM contract prices have surged an estimated 55%–60% in early 2026 as Micron, Samsung and SK Hynix pivoted production toward high-bandwidth memory for AI data centres, forcing Apple into rare price hikes of up to 20% across its MacBook, iPad and Vision Pro lines.

CEO Tim Cook has personally appealed to Treasury Secretary Scott Bessent for regulatory assurances, according to Bloomberg. The Pentagon’s 1260H designation does not legally bar private commercial transactions, but Apple fears Washington could escalate sanctions and place the chipmakers on the stricter Commerce Department Entity List, which would mandate a total trade ban. The company plans to limit any Chinese-sourced chips to devices sold within China. House Foreign Affairs Committee Chair Brian Mast condemned the talks, warning that “allowing this decision to go forward would destroy the President’s agenda to secure supply chains and win the AI Arms Race.”

Separately, SpaceX short sellers have boosted bets to 31% of the free float — roughly 196 million shares, up from 83 million a week ago — even as those wagers have already cost them around $760 million in paper losses since the June 12 IPO, according to Ortex data. Peter Hillerberg at Ortex noted the build-up was “extraordinary for a stock that has been public less than a month” and warned that every $1 share price swing translates to roughly $200 million in gains or losses for shorts. The cost to borrow remains cheap at about 1%, but a squeeze scenario looms if the stock continues to rebound from its post-IPO trough near $153.

S&P/ASX 200 futures fell 23 points or 0.3% to 8,687, pointing to a softer open as the SOX semiconductor selloff weighs on sentiment. The Australian dollar was unchanged at $0.6893. The local session comes a day after the ASX closed out a strong H1, though the IPO market tells a different story — of the 17 companies that debuted this year, only six are trading above their float price. A third of the debutants have shed more than 20%, with gold explorers and small miners dominating the laggard list.

Defence and AI remain the two standout sectors. KTEK Aerosystems, which supplies airframes for combat drones, is still up 65% from its 20-cent IPO price, while drone-maker Boresight has surged nearly 75% since listing last month. The pipeline for H2 is dominated by the anticipated IPOs of AI data-centre players Firmus and Sharon AI, both backed by Nvidia. Charles Aitken at Regal Partners said weakness in smaller domestically facing floats was “broadly irrelevant” for the two globally priced names, while Shaun Weick at Wilson Asset Management pointed to the Nvidia backing as a signal they are “viewed as key parts of the ecosystem.”

Elsewhere, Perpetual rejected a $21.64-per-share bid from EQT-linked entity Windflower Pte, valuing the 141-year-old firm at $2.5 billion — a 40% premium to Tuesday’s close. The board called the proposal “highly conditional” and said it did not represent fair value. Kelsian secured a $NZ101 million ($83 million) seven-year Auckland ferry contract and agreed to acquire local operator Belaire Ferries for $NZ8.9 million.

The ASX’s electronic sign in Martin Place displayed “Congratulations to COMPANY NAME on listing today!” — a tech test that became an unintentional metaphor for the thin IPO pipeline. Source: AFR.

ASX 2026 IPO scorecard — only 6 of 17 debutants trading above their float price at the halfway mark.

South Korea’s 70.9% annual export growth in June — the fastest since 1978, powered by a 199.5% surge in semiconductor shipments.