Morning in New York: The AI Sector Seeks a Foothold

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The situation in the Middle East remains the focus of market participants. According to reports citing a U.S. official, the U.S. and Iran have agreed to temporarily halt mutual attacks and hold technical talks on June 30 regarding shipping regulations in the Strait of Hormuz. However, U.S. President Donald Trump warned that the U.S. could resume military action if Iran fails to comply with the agreements reached. At the same time, the gradual reopening of the Strait of Hormuz is easing concerns about disruptions to oil supplies; however, the risk of heightened tensions and spikes in volatility in commodity markets remains.

The performance of chipmakers and other AI-related companies will be key to the dynamics of upcoming trading sessions. Pressure on the sector intensified following reports that OpenAI’s IPO might be postponed until 2027 due to SpaceX’s weak post-IPO performance and heightened volatility in the AI sector. Meanwhile, the rise in futures suggests an attempt to restore risk appetite.

Given the Fed’s increasingly hawkish rhetoric and ongoing uncertainty in global trade, the key macroeconomic release this Monday will be the Dallas Fed’s Manufacturing Business Activity Index for June (consensus: 1 point; Ma: 0.4 points).

After the close of regular trading on June 29, AeroVironment (AVAV) and Concentrix (CNXC) will report their quarterly earnings.

S&P 500 futures are showing positive momentum. We assess the risk balance for the upcoming session as neutral, with high volatility. The bulls are being supported by the recovery in futures and hopes for a peace agreement between the U.S. and Iran. At the same time, uncertainty surrounding the Strait of Hormuz and weakness in the AI sector are limiting upside potential.

— Apple (AAPL) and Microsoft (MSFT) stocks remain in the spotlight amid the ongoing memory chip shortage. Both companies have announced price increases for some of their devices. At the same time, analysts warn that smaller electronics manufacturers may face more serious problems, as component suppliers are prioritizing their largest customers.

— Shares of Samsung Electronics and SK Hynix came under pressure following reports that the companies are preparing a 10-year investment program worth approximately $1.3 trillion. The funds are expected to be used to expand production of memory chips and semiconductors for AI.

— Baidu (BIDU) shares rose on reports that its AI unit, Kunlunxin, could be valued at around $50 billion in a Hong Kong IPO.

— SpaceX (SPCX) shares have been in the spotlight following confirmation that the stock will be added to the Nasdaq 100 Index effective July 7. This will lead to buying by index funds and ETFs that track the benchmark.

— BioLife Solutions (BLFS) shares rose by about 6% following a Bloomberg report that several potential buyers, including Repligen (RGEN), were interested in acquiring the company.

Trading on June 26 on U.S. stock exchanges ended with mixed results. The S&P 500 fell 0.05%, closing lower for the fifth consecutive session. The Nasdaq 100 fell 1.09%, the Dow Jones dropped 0.09%, and the Russell 2000 rose 0.07%.

That said, market breadth was positive, and the S&P 500 Equal-Weight Index continued to outperform the market-cap-weighted benchmark. The segment of stocks with strong growth momentum—primarily semiconductor manufacturers—remained under pressure.

The healthcare sector (XLV: +3.03%) emerged as a top performer amid rising demand for safe-haven assets and shares of pharmaceutical giants. The IT sector (XLK: −1.87%) topped the list of underperformers.

The movement in stock prices was driven by a rotation of capital away from overheated AI-related stocks, particularly chipmakers. Investors continued to take profits amid a sell-off in South Korea, concerns about margin sustainability, and the aforementioned postponement of OpenAI’s IPO to 2027, as well as risks of increased competition from open-source models and Chinese players. Some capital flowed into shares of software companies and select big tech firms, which helped the broader market avoid a sharp decline.

The University of Michigan’s final reading of consumer sentiment for June was revised upward to 49.5 points, though it fell short of the consensus estimate of 50 points. Households’ inflation expectations for the coming year remained at 4.6%, while long-term expectations fell to 3.3%.

Treasury bond yields continued to decline as WTI prices fell below the $70 mark and expectations regarding the Fed’s interest rate path were revised. Market forecasts now anticipate a rise of approximately 28 basis points by the end of the year, down from a peak of 42 basis points at the start of last week.

— DraftKings (DKNG: +11.3%) is launching the DKeX prediction contract exchange to gain greater control over its product, operational economics, and content depth, while expanding its presence beyond sports betting.

— Eli Lilly (LLY: +7.1%) received a positive opinion from the European pharmaceutical regulator, the CHMP, regarding the expansion of Jaypirca’s indication in the EU for the treatment of adult patients with chronic lymphocytic leukemia.

— The CHMP recommended approving Acadia Pharmaceuticals’ (ACAD: +6.8%) drug Daybu for Rett syndrome and rejecting the application for an EU marketing authorization for Omeros’ (OMER: −19.1%) Yartemlea.

This article was AI-translated and verified by a human editor