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AI Trading Deepens into the Red… Wednesday’s Pressure Without a Map… The Thursday Number That Warsh is Already Watching… And the Calendar That Decides Everything in September
As I write on Tuesday morning, AI trading is in the deep red, with some… Semiconductor stocks Down two numbers.
While it is tempting to point to one headline, a variety of dynamics are colliding simultaneously.
South Korea’s KOSPI Composite Index collapsed nearly 11% last night on bubble fears… This is the natural mean reversion after the near-vertical rally AI trading enjoyed in the spring… Weeks of pressure culminated in panic selling today, given that AI shares They are the biggest winners in the market over the past year, and are number one on the “sell” list… Investors continue to wonder whether hyperscalers will eventually reduce their AI spending, depriving AI infrastructure players of expected profits… More acutely today, concerns about China have intensified.
On that last note, reports that a Chinese state-backed company has begun mass-producing advanced chipmaking equipment has raised concerns that China’s semiconductor industry is catching up faster than expected.
Legendary investor Louis Navellier has a response – it’s not true, don’t worry.
Let’s go to its flash alert Growth investor This morning:
There is a false narrative that Asia is taking over and that the US technology sector will be overtaken by Chinese AI companies and Korean memory companies.
I need you to ignore that. The United States remains a leader in AI, and building an AI data center is real.
In discussing the broader pressure on AI trading and the recent pessimism surrounding it, Lewis highlights a video he will be publishing Navier Buzz Market Which will come out tomorrow. In short, he says it is very bullish for AI trading.
Here’s Lewis’ takeaway:
There are unscrupulous people who try to get you out of your positions before the good news causes your shares to rise…
Once you watch this video, You must be very excited about the tremendous growth that has occurred Nvidia (NVDA) And a lot of our AI data center stocks will last until at least 2029…
I want you not to worry about fluctuations in the market.
But while Lewis points to brighter days ahead, we still have a full palette of potential events that could shake the market right up…
Tomorrow comes the latest meeting of the Federal Reserve’s Federal Open Market Committee (FOMC).
The prevailing expectations are for the fifth meeting in a row without a change in interest rates.
As I write on Tuesday, CME Group’s FedWatch tool estimates the odds of interest rates remaining in the 3.50%-3.75% target range at 70.6%, with a 29.4% chance of a “surprise” rate hike.
Now, there is no new summary of economic forecasts tomorrow, which means no updated dot chart. The FOMC statement itself, and anything Warsh says in his news conference — perhaps not much — is the only new information investors are getting from the Fed.
This means that tomorrow will likely bring a significant reduction in the content Wall Street will enjoy — and that’s by design.
As we covered here at digestWarsh has spent months demolishing the mechanisms built by former FOMC chairs Ben Bernanke and Jerome Powell — the dot charts, running commentary, and “here’s almost where we’re going” directives around which Wall Street organized entire trading strategies.
At his confirmation hearing, Warsh made it as clear as a Fed chairman can:
I don’t believe in forward guidance. I don’t think I should preview what the future decision might be.
This is not the Fed Chairman trying to send a signal to the market – this is someone actively trying to get out of the way. So, an honest prediction for tomorrow is not an exciting press conference – it is more like the opposite…
Fewer soundbites. More “The data will tell us.” And the deliberate lack of answers to reporters trying to lure him into September and beyond.
But removing the signal does not diminish Wall Street’s appetite for it
It sends that appetite to look elsewhere.
Fifteen years of forward guidance has trained an entire industry – the dots analysts, the translators of Fed speech, the hedge fund desks centered around parsing the Fed chair’s precise wording – to anticipate a roadmap.
Deprive them of a map, and they won’t stop looking for direction. So, watch if they start to over-explain: Pause before answering… Which question gets a short answer and which question gets a long, precise answer… How his body language changes on different topics.
It will be interesting to watch how hard it is for the market to struggle to find meaning in a man who is trying so hard not to give it any.
However, there is a limit to how much you can actually read during the pause period. Therefore, there will likely be two sources coming to “signal” that the market will begin to overweight: the FOMC meeting minutes and the other 11 committee members.
As for the FOMC minutes, they provide a detailed, recorded description of the committee’s internal discussion. Under Powell, minutes were often an afterthought, as a press conference usually told you most of what you needed to know.
Under Wershe, the matter was reversed: with his remarks now running to about half their old length and no color being offered in the room, the minutes became the only detailed record of what the committee discussed, line by line.
Minutes from this meeting will be released on Wednesday 19 August – we will return at that time.
Wall Street will pay more attention to the other 11 voices on the committee. After all, a quiet Warsh does not mean a quiet Fed.
Governors and regional chairs – Christopher Waller, Lisa Cook, Philip Jefferson, and others – have been filling some of that void with their public remarks. Expect more of that from here, precisely because the chair isn’t doing it for them anymore.
But that doesn’t mean we don’t have a great data point to trade this week
If Warsh doesn’t give the market anything meaningful tomorrow, the next real data point will arrive a day later: the June PCE report on Thursday.
Early estimates from truffle We see the headline PCE rate falling to around 3.7% year over year, down from 4.1% in May, while the core PCE rate is expected to remain roughly flat near 3.3%.
Sounds great, doesn’t it?
Yes, but there is a limit to which Warsh will care.
We told you last month that the new Fed chair is not relying primarily on the record reading of personal consumption expenditures that dominates the headlines. Instead, it monitors the average personal consumption expenditures, which the Federal Reserve Bank of Dallas publishes monthly.
It excludes the more extreme price movements at both ends of the distribution—the infrequent highs and lows that come from a single volatile category—and averages out what remains.
In May, the core PCE rate stood at 3.4% while the trimmed average remained at 2.42%, nearly a full percentage point and just above the Fed’s 2% target.
This gap was not just a one-month fluke. The median 12-month reading has remained in a narrow range of 2.3% to 2.4% for six straight months now, even as the headline personal consumption expenditures index has swung from the top 2 to the bottom 4 over the same stretch.
So, while the press will be watching Thursday’s PCE data and will be eager to hypothesize about the rate’s path if it comes in cold, the real issue will be if this flatness in the average continues.
If there is a significant narrowing or widening, this is what will trigger Warsh.
Meanwhile, Wall Street is increasingly looking forward to September
The Fed’s September meeting brings a new summary of economic forecasts – a new dot chart – that will be the subject of real controversy.
Nine of 18 FOMC participants had planned to raise interest rates at least once in 2026 in June. Warsh himself made no predictions at all, and it’s the same silence he’s likely to maintain tomorrow.
How will these same participants vote next month?
As I write on Tuesday, CME Group puts a 57% probability on a “hold” in September. But the odds of a quarter-point reduction are about 23%, while the odds of a quarter-point reduction are about 20%.
We haven’t seen this degree of uncertainty about interest rates in years — which means every data release between now and mid-September carries more weight than it did before, precisely because there’s no guidance to close the gaps in between.
But it all starts with the Federal Open Market Committee (FOMC) meeting tomorrow.
Don’t ignore other potential market movers this week
The Fed and Personal Consumption Expenditures data aren’t the only reasons that matter tomorrow and Thursday.
Both days also hold some of the year’s most important corporate earnings – and they’re right at the forefront of the debate we’ve been following closely this year. digest…
Whether big tech companies’ spending on AI is still worth the price of admission remains to be seen.
Tomorrow afternoon after the market closes Microsoft (MSFT) and meta platforms (dead) Earnings report. Thursday after closing, it’s Amazon (Amzn) – with Apple (Apple) That’s also being reported today, although it doesn’t have the same excessive capex story as the other three.
alphabet (Google) It was reported last week, and its findings set the tone for what is to come. As we covered here at digestAlphabet won easily, but the stock fell nearly 7% the next day on fears of overspending on artificial intelligence.
Is this what we will see this week as well?
The market’s patience with this type of spending is no longer unconditional. So, if any of these three raise capex guidance again, don’t be surprised by the same “beat the numbers, sell the stock” reaction that hit Alphabet last week.
Watch how hyper-scale capex forecasts impact AI infrastructure trading
Our technology expert Luke Lango, editor Innovation investorargued that maintaining — or raising — capex guidance should support AI infrastructure stocks, not sink them, since he explained the demand-side check the market is getting.
His reading of Alphabet’s post-earnings slide was that it was due to a macroeconomic-driven selloff — higher oil prices and a jump in Treasury yields that occurred on the same day. So, take away the overall noise, and the capex increase should be a bullish signal.
The bottom line: While Warsh will spend this week trying to say as little as possible, three of the world’s four biggest AI spenders will do the opposite — tell investors exactly how much they plan to spend next, and find out in real time whether Wall Street agrees.
One more thing: Luke’s AI MegaDeal event is two days away
In 2023, the project company Spark Capital He wrote a check for $75 million to a mysterious AI startup with almost no revenue or a bar code. That was the beginning Anthropic.
Today, Spark’s stake is worth an estimated $7 billion. Nearly 100 to 1, on a company that wasn’t on any exchanges when they bought into it.
Luke has been studying this pattern closely – and believes it is on the verge of being repeated, just with different names attached. To be clear, being early is no guarantee that monsters will return. But this is the only way to be part of these rocket ships before the price reflects what everyone already knows.
That’s the idea behind this free Luke event Thursday, July 30 at 1pm EST — just as the debate over AI spending reached a fever pitch this week.
Luke will walk through it The complete framework for identifying these opportunitiesin addition to revealing a specific company that he believes fits the current pattern.
To join Luke for free, Just click here to register to reserve your seat.
For now, all eyes are on tomorrow’s FOMC meeting and Warsh’s comments. We will report back.
I wish you a good evening,
Jeff Remsburg
(Disclosure: I own MSFT, AMZN, GOOGL, AAPL)
