📊 Market Overview
AI and semiconductor stocks came under sharp selling pressure to close last week, with South Korean chipmakers SK hynix and Samsung leading the decline and the SMH (a popular semiconductor ETF) entering the week under pressure. The biggest driver was a one-two punch: rising oil prices and bond yields squeezing stock valuations, combined with renewed fears about AI regulation after Anthropic’s CEO called for slowing frontier model development. The one event to watch this week is Wednesday’s Federal Reserve interest rate decision, where Goldman Sachs now expects a 25 basis point (0.25%) rate hike.
📊 Market Snapshot
AI stocks are selling off on fear and headlines, not because companies actually stopped spending — so don’t panic-sell, but don’t rush to buy the dip before Wednesday’s Fed decision either.
📈 The Big Picture
Three forces are colliding this week. First, the Fed is expected to raise interest rates by 25 basis points on Wednesday — and what matters even more than the hike itself is the language around it. If the Fed signals more hikes ahead, that’s a much tougher environment for high-growth tech stocks. Second, oil prices are surging due to a Saudi pipeline disruption, delayed Strait of Hormuz negotiations, and high refinery prices — all of which feed inflation right before the Fed decides. Goldman Sachs notes that oil, rising bond yields, and geopolitics were the main wall blocking indexes from advancing last week, even though corporate earnings stayed strong.
Meanwhile, the AI spending debate is shifting. Headlines from Anthropic’s CEO about slowing AI development spooked investors, but actual spending data tells a different story. TSMC (TSM) is expanding both its 2nm and 3nm chip production capacity and scaling up CoWoS (its advanced packaging technology), while SanDisk (SNDK) is hiring memory specialists in South Korea. The fear is real, but the factory floors are still busy.
📖 Term of the Day
Basis Points (bps) — A way to measure interest rate changes where 1 basis point equals 0.01%. So a “25 basis point hike” means rates go up by 0.25%.
Why you care today: Goldman Sachs expects the Fed to raise rates by 25 basis points Wednesday, and JPMorgan’s analysis suggests developed-market rates may need to be roughly 100 basis points higher than current levels if economies stay strong and inflation remains sticky.
💼 Watchlist: 3 Stocks to Know Today
TSMC (TSM) — “The Quiet Proof”
While AI sentiment is crashing, TSMC is physically expanding — boosting 2nm capacity from ~90,000 to ~110,000 wafers per month by mid-2027 and growing 3nm from over 180,000 to ~210,000. Foundries don’t build that kind of capacity on hype — they do it when real customers are placing real orders.
IREN (IREN) — “The Double Upgrade”
JPMorgan double-upgraded IREN (an AI infrastructure operator with actual power contracts) and raised its price target to $80, while BTIG is also bullish. The market is starting to separate companies that have real energy capacity and contracts from those that are just announcing pivots.
Bloom Energy (BE) — “The Power Play”
Mizuho raised its price target on Bloom Energy to $35, because shortages in gas turbines and delays in grid connections are making behind-the-meter power solutions (on-site energy generation) far more valuable. If data centers can’t get grid power fast enough, companies like Bloom become the backup plan.
💬 Esther’s Take
