Top stories for the morning: Iran crisis pressures Arab IPOs, OpenAI to work for Pentagon

AMD shares grew by almost 9% thanks to positive reaction of analysts to the presentation of a new AI chip and Helios server system. OpenAI signed its first contract with the Pentagon for $200 mln. Meanwhile, the Middle East's new equity capital markets, which have so far remained stable, came under pressure - uncertainty over the Iranian crisis may prevent large IPOs, although domestic demand remains strong. On these and other topics - in our review of key events for the morning of June 17.

OpenAI has received its first contract from the U.S. Department of Defense - to develop artificial intelligence tools for $200 million. "Under this contract, the contractor will develop prototypes of advanced AI capabilities to address key national security challenges in both combat and administrative domains," the U.S. Department of Defense said in a statement. 

OpenAI reported that the contract was part of a new OpenAI for Government initiative that will provide U.S. government agencies with access to custom AI models for homeland security tasks, as well as technical and product support.

"The $200 million cap contract will apply our best practices to help the U.S. Department of Defense identify and prototype AI solutions, from improving healthcare for the military and their families to analyzing program and procurement data and providing proactive cyber defense," OpenAI said in a statement. That said, all AI use cases must comply with company policy.

The new contract will account for only a small fraction of OpenAI's sales, which now exceed $10 billion a year, notes CNBC. In March, the company raised $40 billion in investments at a $300 billion valuation.

Advanced Micro Devices (AMD) shares rose nearly 9% on June 16 after analysts at Piper Sandler raised their target price on the stock amid optimism over the chipmaker's latest product presentation, wrote CNBC.

Analysts noted that they expect AMD's graphics processing unit (GPU) sales to recover in the fourth quarter - by that time the company, according to their forecast, will have already overcome the major costs associated with new U.S. export restrictions. AMD previously reported that it would incur $800 million in costs due to new licenses to export semiconductors to China and a number of other countries.

Last week AMD unveiled the next generation of AI chips, the Instinct MI400 series. Specifically, the company announced a server cabinet called Helios, which allows thousands of these chips to be combined. This system is aimed at customers in the AI sector, including cloud companies and developers of large language models. Using AMD chips, for example, will be developer ChatGPT, said OpenAI CEO Sam Altman, who spoke at the presentation. 

"Overall, we are impressed with the new product launches at AMD's event, especially the Helios system, which we believe is key to the growth of AMD's Instinct lineup," Piper Sandler analysts said in a report. They raised their target price on AMD shares to $140 from $125.

The company's shares rose above $126 in trading on June 16, hitting a high since Jan. 7, from which they have pulled back amid increased export controls on chip shipments. 

The escalating conflict between Israel and Iran is bringing uncertainty to Middle East stock markets, jeopardizing the resilience seen earlier this year, writes Bloomberg. While stock markets in the Middle East have shown resilience to spikes in violence in the past, fears of a prolonged conflict are growing. Analysts at JPMorgan Chase & Co. David Aserkoff and Inga Galeni emphasized in a client note that the likelihood of a protracted conflict is higher this time around, as is the risk of it widening.

So far, no IPOs have been postponed or canceled, but the risk of unstable trading conditions for new deals has increased, the agency points out. The prospect of the next window of opportunity after the summer break also remains uncertain. "Large government-backed IPOs are unlikely in the near term due to heightened regional tensions," said Akber Khan, acting CEO of Al Rayan Investment in Doha. - However, smaller, domestic-oriented offerings should not be significantly affected."

The conflict erupted at a time when several Saudi Arabian companies were actively promoting plans to float shares. Medical services operator Specialized Medical Co. for example, is finalizing retail subscriptions for its $500 million IPO this week, although no listing date has yet been announced. Gym chain Sports Club is preparing to disclose its price range on June 22. In addition, Dar Al Majed Real Estate Co. developer Dar Al Majed Real Estate, home improvement store owner Marketing Home Group Co. and technology company Ejada Systems Ltd. have also received approval to list.

Amid such geopolitical tensions, the upcoming trading debut of Saudi budget carrier Flynas Co. will be particularly telling, as it holds the largest IPO in the region this year. The deal, scheduled for the coming weeks, will be something of a test of market resilience. Bids for the offering have already topped $100 billion, indicating strong institutional demand.

Meanwhile, Hitesh Asarpota, head of Emirates NBD Capital, said he did not expect a queue of IPOs until September. "Investors remain cautiously optimistic and regional markets seem to be stabilizing," he said.

One of the brightest rallies in the commodities market is nearing an end - the price of gold is forecast by Citigroup to fall back below $3,000 an ounce in the coming quarters, reports Bloomberg.

"Our analysis suggests gold will return to levels around $2500-2700 per ounce in the second half of 2026," analysts led by Max Layton said in a report. The reasons for the fall could be weakening investment demand, improving global economic growth and a rate cut by the US Federal Reserve.

Since the beginning of the year, gold has risen in price by 30%, having updated the record in April. The price growth was caused by Donald Trump's destabilizing trade policy and the escalation of the conflict in the Middle East, which intensified investors' interest in safe assets. Additional factors were concerns about the U.S. budget deficit, weakening of the dollar and active gold purchases by central banks to diversify reserves.

"We expect investment demand for gold to decline in late 2025 and into 2026 as support factors in the form of President Trump's popularity and 'growth insurance' (interventions that can support the economy - Oninvest) in the US will eventually come into effect, especially as the midterm elections approach," the analysts said. In addition, in their opinion, there is a significant potential for reducing the Fed rate from the current tight level to neutral.

In Citi's baseline scenario, the probability of which is estimated at 60%, the price of gold will first consolidate above $3000 per ounce in the next quarter, and then begin to decline. 

At the time the report was published, the spot price of gold was around $3396 per ounce.

Asia-Pacific markets rose Tuesday amid investor hopes that the conflict between Israel and Iran will remain localized - Tehran has reportedly expressed willingness to negotiate, reports CNBC.

- Japan's Nikkei 225 index added 0.5 percent, while the broader Topix index added 0.2 percent.

- In South Korea, the Kospi index rose 1.1 percent and the Kosdaq climbed 0.7 percent.

- China's mainland CSI 300 index was little changed in morning trading, while Hong Kong's Hang Seng added 0.1%.

- In Australia, the main S&P/ASX 200 index rose 0.1 percent.

- U.S. stock futures are lower in morning trading in Asia as investors continue to monitor the conflict between Israel and Iran.

- Meanwhile, the previous evening in the US, all three key indices ended trading with growth amid hopes for a positive resolution of the Middle East crisis. The Dow Jones Industrial Average rose by 0.8%. The S&P 500 index added 0.9%, while the Nasdaq Composite index rose by 1.5%.