Greetings from Singapore! Welcome to this edition of CNBC's Daily Open, where global events and tech allegiances are driving market movements.
Wall Street is buzzing with optimism as the Dow recorded another high, driven by hopes that the five-month conflict in the Middle East is nearing a resolution. A potential agreement between Iran and Oman regarding commercial shipping in the vital Strait of Hormuz, which would grant Tehran increased control, is contributing to this sentiment. However, it's worth noting this outcome deviates from Washington's initial objectives. President Donald Trump has hinted that a U.S. deal to reopen the strait could materialize as early as Wednesday or Thursday, further fueling market confidence and leading to a cooling of both Brent and WTI crude futures.
Meanwhile, the burgeoning AI sector is revealing that loyalty might hold more sway than raw earnings. Despite posting robust results and optimistic data center growth forecasts, AMD saw its shares slide after Elon Musk declared SpaceX would exclusively build its AI infrastructure on Nvidia chips. This pledge sent Nvidia's shares climbing over 3%, while AMD closed 7% lower. Musk's commentary overshadowed SpaceX's own performance, as its shares fell 13.6% after a sixfold jump in AI capital expenditures to $18.4 billion spooked investors, despite beating earnings expectations. Musk remains bullish, forecasting SpaceX to reach $1 trillion in annual revenue by 2030, a year ahead of previous projections.
Federal Reserve Governor Lisa Cook expressed her readiness to raise interest rates, citing the persistent risk of entrenched inflation after five years of above-target figures. This hawkish stance has traders now pricing in a 55% chance of a September rate hike.
Significant leadership shifts are also underway in the AI world. Google's chief scientist Jeff Dean is departing after 27 years to launch his own venture, while DeepMind CEO Demis Hassabis moves into a chairman role. This shake-up contributed to a 4% dip in Alphabet shares, particularly as Google reported being cash flow negative for the first time on record, with full-year capital expenditure projections soaring to $205 billion. Not to be outdone, Meta is stepping into the coding agent arena with 'Muse Code,' challenging rivals like Anthropic and OpenAI primarily on price rather than capabilities.
In the political arena, progressive Abdul El-Sayed emerged victorious over Rep. Haley Stevens in Michigan's Democratic Senate primary, setting the stage for a closely watched general election against Mike Rogers. And finally, market veteran Michael Burry of "The Big Short" fame is doubling down on his bearish outlook, warning that the current S&P 500 rally could lead to a significant market correction akin to the 1987 crash. He critiques the AI boom, suggesting its demand is fueled by unsustainable financing.
