Yesterday most major US indices closed higher as some of the AI anxiety from earlier in the week faded. The S&P rallied 0.8% closing above its 50d for the first time since 2/11 putting the all-time high, around 7k, squarely in the cross hairs again. Mega-cap tech and software led to the upside ahead of a big evening of earnings. Financials which also got throttled on Monday bounced back while staples and commodity related sectors gave back some of the recent gains as the atoms vs. bits trade retraced. Sticking with that theme, crypto rallied sharply with Bitcoin bouncing over 10% from this week’s low.

Nvidia earnings was the main event after the close and you would be hard pressed to find anyone who didn’t think the company would put up strong results. The bigger questions for those of us not completely in the weeds were - In the short term - how would the market react to the report? And from a longer-term perspective - The big overarching question, how long will this spending cycle continue? The company beat estimates with quarterly revenues ~$68B bringing the annual run rate >$200B up from ~$60B in 2024, which is hard to conceptualize. We'll try to help, that increase is more than the total annual revenues of McDonalds, Nike and Starbucks combined or about the GDP of Kuwait, which accounts for nearly 5% of global oil production. I digress, Jensen Huang said, “the Chat GPT moment of agentic AI has arrived”, didn’t suggest any slowdown in demand/impact from competitive chips and pushed back on the market narrative around the demise of software. The stock was volatile in after-hours. It opened around unchanged today and came under pressure since which has triggered some weakness more broadly across the semi/memory stocks and other AI infrastructure stocks. The ICE Semiconductor index is down >3%.

The other side of that AI trade recently has been software and there were a couple of notable earnings in the sector as well with both Salesforce and Snowflake. Both stocks moved higher ahead of their reports yesterday and the results have helped with the stabilization across the sector which was initially catalyzed by the recent Anthropic event highlighting the technology compliments software doesn’t necessarily displace it. The mix of news is driving a reversal on both sides of this trade which was very stretched. See the Weekly Chart ratio chart of software/semis.