Bulls & Bears

Monday opened on fumes. Volume was 28% below the 20-session average after the long Fourth of July weekend. The Dow punched above 53,000 for the first time, closing at a record 53,057. Chip stocks bounced 2.2% on the SOX after shedding 12% across the prior two weeks. Broadcom extended its Apple partnership to 2031. SK Hynix kicked off marketing for its US listing. But participation was thin, and the move told you more about positioning than conviction. As Mark put it on the morning call: "not a night to necessarily take a huge indicator from."

Tuesday was the day everything turned. Samsung reported a 19-fold increase in operating profit — a record — and the stock dropped 7%. SK Hynix fell 6%. The KOSPI slumped 5%. The Philadelphia Semiconductor Index cratered 4.7%. The read was straightforward: all the good news was already in the price. Away from chips, the real trouble arrived from the Strait of Hormuz. Three tankers were attacked in 24 hours. The US Treasury revoked the waiver allowing sales of Iranian oil. WTI jumped 5% to $72. Brent spiked 5.2% to nearly $76. SpaceX joined the Nasdaq 100 and promptly fell 7% on its first day in the index.

Wednesday was chaos. Trump told reporters at the NATO summit in Ankara that the Iran ceasefire was "over." He said the US would "probably hit them hard again tonight." Three hours later, it did. The US struck approximately 170 targets across Iran over Tuesday and Wednesday combined, including air defences, IRGC small boats, and coastal radar. Iran retaliated by hitting US bases in Kuwait and Bahrain. Brent briefly topped $80 for the first time since June 22. The S&P fell 0.3%. The Dow dropped 1.1%. Europe's STOXX 600 had its steepest one-day decline since March. But — and this is the part that mattered — the Nasdaq finished up 0.2%. Chip stocks bounced 2%. The AI trade was already finding buyers again while bombs were falling.

Thursday felt like a different planet. Trump said Iran had called wanting to make a deal. Oil dropped 2%. Chip stocks rallied 3.1%. Meta announced plans to put a custom AI chip into production in September and double its computing power to 14 gigawatts next year. Micron bumped its planned US investment to $250 billion through 2035. SK Hynix priced its IPO at $149 per ADR — seven times oversubscribed — raising $26.5 billion in the largest US listing by a foreign company ever. The S&P closed at 7,541. The Nasdaq hit 26,207. The market's attention span for geopolitics is about 18 hours. For AI, it's infinite.

Oil was the main event. Brent swung from $71 on Monday to above $80 on Wednesday and back to $76 by Thursday's close. The violence was the catalyst: three tanker attacks, 170 US strikes across Iran, Trump's "ceasefire is over" rhetoric, and Iran threatening to shut Hormuz entirely. Then Trump said Iran called wanting a deal, and crude dropped 3% in an afternoon. If you're trading oil on headlines alone right now, you're going to get whipped around. The underlying picture hasn't changed much: Hormuz is half-open at best, and the supply recovery that drove prices to pre-war levels in June was always fragile.

Gold drifted lower most of the week, which seems counterintuitive given the geopolitical chaos. The problem is yields. When 10-year Treasuries jump to 4.57% and the dollar firms, gold struggles to compete as a non-yielding asset. It finished around $4,081, still historically elevated but well off the January highs near $5,589. Goldman maintains a $4,900 year-end target. The next catalyst is either a genuine de-escalation in the Middle East (bearish for gold) or a funding crisis (bullish).

The story nobody is talking about: global memory chip monthly sales hit a record $74.6 billion, per UBS. Sam Altman said rising memory and compute costs were "definitely a headwind" for OpenAI's expansion. The scarcity trade in AI hardware is real. The question is whether the buyers can keep writing the checks.

Morgan Stanley flagged that equity repo financing costs hit 200 basis points above the fed funds rate at quarter-end — the highest since December 2024. Even after normalising to 89 bps, the structural demand for leverage hasn't gone anywhere. Dealers hold about $211 billion of equity financing exposure on their balance sheets. Leveraged ETFs are concentrated in tech and semis. The put-call ratio — downside insurance — is at its lowest level on record. Fund managers are at their lowest cash levels in a decade.

In plain English: everyone is fully allocated, leveraged into one direction, and not hedged. Morgan Stanley's Tobias said it directly: "the marginal buyer has become one that's been increasingly reliant on leverage." Sam Earl at Barclays called it a straightforward supply and demand problem — demand for financing has surged while dealer balance sheet capacity hasn't kept pace. The next quarter-end will test this again.