Article published at 9:20 a.m. CT.
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- The AI trade is still alive and kicking
- Oil prices fall below $90 a barrel
- OpenAI jumps on the IPO bandwagon
Thoughts that the AI trade might have been over after last Friday’s rout looked to be premature. Interest is on the upside as stock futures are edging higher again today in the tech-dominated Nasdaq Composite as well as the Dow Jones Industrials and the S&P 500.
More good news: Oil prices were falling better than 2% and below $90 a barrel amid optimism that a deal between the U.S. and Iran might be in the offing. President Trump said an agreement could be reached in “two or three days” that would open the Strait of Hormuz “immediately,” according to CNBC.
Yesterday saw a much calmer scene in the markets as the tech-heavy Nasdaq composite and the S&P 500 edged higher after Friday’s rout, with Intel and Micron leading the way for chip maker gains. Remember Friday’s losses were the worst in six years, so yesterday’s claw-back helped lift the Nasdaq by 0.9% and the S&P added 0.3%. The Dow Jones Industrial Average hugged the flatline throughout most of the session, slipping 0.2% at the close.
Intel shares are shooting higher again in pre-market trading, adding nearly 13% to yesterday’s 11% rally after a published report said that Google and Nvidia were looking at the firm as a backup chip maker for advanced processors. Google is said to have placed an order with Intel to produce 3 million tensor processing units by 2028. TPUs are used to accelerate AI workloads.
Micron shares are bouncing another 10% in the premarket after a near 10% leap yesterday, recouping the 13.5% it lost in Friday’s crash and then some. It’s likely some of that was sparked by a buy-the-dip reaction. The semiconductor company has been a darling in the AI runup, jumping better than 200% year to date and looks to be back on its upward trajectory.
OpenAI jumped on the AI-goes-public bandwagon yesterday, announcing that it, too, confidentially filed intentions for an initial public offering with the Securities and Exchange Commission, a plan that has long been expected but was still a surprise. In a blog post on its website, OpenAI said “it may be a while” before it takes the plunge, noting about the confidential filing, "We expect it to leak, so we're just announcing it." It’s widely expected to go public in the fourth quarter, though the blog stated, “there are things we want to do that are likely easier as a private company.”
OpenAI, which was first to the whole AI movement with its 2022 launch of ChatGPT, filed only days before the much-anticipated SpaceX initial public offering, scheduled for Friday and expected to be the largest IPO in history. And it’s also been only a week since Anthropic filed its preliminary IPO paperwork. These three juggernaut IPOs are likely to dominate trade talk for some time, and it will be interesting to see how well they juggle investor sentiment and how stock prices might fluctuate going forward.
Elon Musk took to a podcast Monday to talk about AI data centers in space, unveiling a draft version of his dream. Most think orbital data centers could be extremely complex, but Musk said it’s not. "Part of what I want to convey here is that there's not some 'magic' that's necessary, that doesn't exist for AI satellites," according to the pretaped podcast. "A lot of this is technology we've already made for Starlink V3 satellites. We don't think this is a super hard problem compared to things we already do." Stay tuned for that, though it could be years before there’s any movement.
Existing home sales are due out later this morning, courtesy of the National Association of Realtors. Analysts are looking for an annualized sales rate of 3.8 million to 4.05 million units. That’s not far from April’s 4.02 million units, which amounted to a 0.2% increase and was off expectations. In an average year, the annualized sales rate hovers from 5 million to 6 million total units. Remember that existing home sales typically offer good insight into the health of the economy through financial activity, job creation and consumer spending, and weak numbers could be telling.
Home sales continue to lag for a number of reasons, though it’s tough to determine which is the greatest hit. Mortgage rates are higher and don’t look like they’ll see any meaningful change. Inventory is tight – few homeowners with 3% or lower rates on their mortgages are willing to give that up. Making matters worse, first-time homebuyers have dropped to their lowest level on record, creating a structural issue that can’t be undone with lower interest rates. NAT is tracking them at 21% of the housing market, nearly half the historical norm at near 40%.
Finally, whoever thought Apple’s Worldwide Developers Conference would be a dud? As expected, Siri is improving with a new AI version of its chatbox, which it developed with Google’s Gemini. Once released, the company said it will be more conversational and will complete tasks like purchasing concert tickets or finding lost photos. That didn’t do much to help the stock price, which hit a fresh high ahead of the conference, but ended the session lower by nearly 2% and is heading to the downside in premarket trading.
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