Markets are buzzing — and we’ve got your first take.
Microsoft has achieved a historic milestone, becoming only the second company to surpass a $4 trillion market capitalization. This surge reflects robust investor confidence, largely driven by the tech giant’s advancements in AI and cloud computing.
The tech titan’s ascent, alongside Nvidia, underscores the significant market focus on AI infrastructure. The key question for investors remains: Is this valuation a sustainable benchmark for the future of AI-powered growth?
In today’s financial recap:
Microsoft blasts past $4 trillion valuation
Core PCE inflation stays elevated, impacting Fed outlook
China flags security concerns for Nvidia AI chips
Meme stocks surge anew fueled by retail enthusiasm
Microsoft Surpasses $4 Trillion Market Cap
The TradeWatch: Microsoft has become the second company ever to achieve a $4 trillion market capitalization, marking a significant moment for the tech giant and the broader market following its latest earnings beat.
Unpacked:
The tech titan’s shares surged, pushing its valuation past the $4 trillion mark, cementing its status as a leader in artificial intelligence and cloud computing.
This achievement reflects strong investor confidence in Microsoft’s sustained growth, particularly propelled by its closely-watched Azure cloud division, which posted a 39% sales increase beating analyst expectations. Azure growth continues to be a key driver.
Microsoft’s performance places it alongside Nvidia as a pioneer of the $4 trillion club, underscoring the market’s ongoing embrace of companies heavily investing in AI infrastructure and innovation. AI infrastructure investments are a major theme.
Bottom line: Reaching this valuation highlights Microsoft’s pivotal role in the current business landscape, with AI and cloud services powering its continued ascent. Investors should monitor how this momentum continues to shape the tech sector’s future performance.
PCE Inflation Stays Hot, Complicating Fed Outlook
The TradeWatch: U.S. inflation, as measured by the Fed’s preferred gauge, remained stubbornly elevated in June, keeping price growth above the central bank’s target and potentially influencing future interest rate decisions.
Unpacked:
Core PCE inflation held steady at 2.8% year-over-year in June, signaling that price pressures persist beyond the Federal Reserve’s desired 2% target, with monthly gains also holding firm.
Economists note that tariff-driven inflation, particularly in goods, is contributing to these elevated readings, while services inflation remains more subdued, a dynamic that keeps the Fed cautious about cutting rates too soon.
Markets are reacting to the sticky inflation data; the probability of the Fed holding interest rates steady at its September meeting has increased, reflecting a less certain path to monetary easing.
Bottom line:
Sticky inflation figures mean the Federal Reserve will likely maintain its patient approach to interest rate policy, emphasizing the need for more consistent data before considering any shifts. Investors should prepare for a potentially longer period of stable rates as inflation data continues to guide central bank actions.
China Summons Nvidia Over AI Chip Security Concerns
The TradeWatch: Chinese regulators have summoned Nvidia representatives to address alleged security vulnerabilities in its H20 AI chips, specifically concerning location tracking and remote shutdown features. This move signals a potential shift in US-China tech relations and could impact AI chip supply chains.
Unpacked:
Chinese authorities, through the Cyberspace Administration of China, have requested explanations from Nvidia regarding the alleged security risks, asking for details on location tracking and remote shutdown capabilities in the H20 chips.
This development contrasts with a recent apparent improvement in US-China trade relations, occurring just days after a summit between trade officials from both nations. The H20 chip, previously banned by the Trump administration, had recently received clearance for sale to China by US authorities.
The less-advanced H20 chip was designed to comply with earlier US trade restrictions on China, and US lawmakers have voiced concerns that its resumption in sales could bolster Beijing’s military capabilities and AI competitiveness, though administration officials argue China already possesses comparable or superior domestic alternatives.
Bottom line: This incident highlights ongoing geopolitical tensions impacting the critical AI hardware sector. Navigating these complexities will be key for companies like Nvidia as they balance market access with international regulatory scrutiny.
Meme Stocks Re-Ignite: Retail Investors Drive Unusual Rallies
The TradeWatch: A new wave of meme stock activity is underway, seeing retail investors mobilize online to drive significant gains for companies like Kohl’s and Beyond Meat, often disregarding fundamental business performance.
Unpacked:
Retail traders are increasingly targeting struggling companies perceived as undervalued or highly shorted, leading to dramatic price swings such as Kohl’s 105% intraday surge on July 22.
Beyond Meat exemplifies the disconnect, reporting a Q1 gross loss and declining demand, despite its status as a target for meme stock interest.
High short interest, with companies like 1-800 Flowers seeing nearly 73% of its float sold short, positions them as prime targets for retail-driven short squeezes.
Bottom line: This resurgence highlights the persistent influence of retail traders in today’s markets, showcasing how coordinated online activity can temporarily detach stock valuations from company fundamentals. It signals continued volatility for companies caught in the crosshairs of this influential trading demographic.
The Shortlist
AMD reports upcoming August 5th earnings, with analysts anticipating Q3 upside and market gains driven by its CPU performance.
Cadence pays $140 million to settle claims of illegally selling semiconductor design technology to a Chinese military university on the U.S. export blacklist.
Rolls-Royce sees profits soar 50% on strong demand for jet engines and power generators, pushing shares to a record high and revising its full-year outlook upward.
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— Michael & the TradeWatch.io editorial team
