AI Chip Stocks Surge & Crude Oil Plunges on U.S.-Iran Peace Deal, SPCX Rallies

Introduces Tom White to discuss the US-Iran agreement news that broke over the weekend, first posted by Pakistan's PM on Twitter/X.

Diane

Tom White

Markets are extending gains from last week; all four major indices were up (S&P +0.7%, Nasdaq +2%, Russell +3.8%). The S&P 500 is opening just over 1% below all-time highs, raising the question of how much of the Iran deal was already priced in. Without the deal, a 5-10% pullback might have been expected given closed Straits of Hormuz and rising energy prices.

The fact that markets didn't fall more suggests the positive outcome was anticipated. This makes Kevin Warsh's job as Fed chair easier with crude oil falling below $80/bbl (first time since April 17). Overseas markets, which rely more on the Straits of Hormuz, are bouncing back strongly.

Questions whether the return to normalcy will be slow, noting oil still around $80/bbl.

Diane

Tom White

Oil decline will take time because countries need to refill strategic reserves, which stretches the timeline. Production will likely increase globally, but building new storage capacity will also lengthen the process. This is still positive for risk assets and inflation, making the Fed's job easier.

The Fed can frame inflation as a one-time blip and reset the narrative, reducing rate-hike expectations.

Notes semis are jumping this morning, which makes sense in the risk-on context.

Diane

Tom White

Semis were negatively impacted by geopolitical risks and are now rebounding. Morgan Stanley raised Western Digital and Seagate price targets; TD Cowen issued a positive note on Micron. Nvidia is lagging, down 13% from highs, but at $200/share it may be undervalued relative to peers like AMD and Intel.

Nvidia's valuation is relatively low compared to other semi winners, and it may see analyst upgrades and a resurgence.

Asks about SpaceX shares gaining in premarket.

Diane

Tom White

Elon Musk said SpaceX could see $1 trillion in revenue by 2030 and over $1 trillion by 2031. Stock was up 19.2% on first trading day, now above $170. Options may start trading tomorrow, which could increase interest but reduce stock volume. Premarket volume of 10M shares is more than triple Nvidia's typical volume.

The hype continues, and SpaceX is at the forefront of investor attention.

Brings up Fox acquiring Roku in a multi-billion dollar deal, noting the shifting media landscape.

Diane

Tom White

Fox is acquiring Roku for $160/share, $22B enterprise value. JP Morgan is skeptical the founder will sell; Baird downgraded Roku. The stock popped to ~$145, not a full takeout premium. $1.24B breakup fee. Deal approved by both boards. Regulatory concerns: combined entity would be the third-largest network by viewer eyeballs. Fox pays $96 cash + 0.9693 Fox shares per Roku share.

M&A activity in media continues (Paramount-Warner Bros Discovery went through), so regulators will scrutinize this.

Asks about the week ahead, mentioning Warsh and the Fed.

Diane

Tom White

Key data: Empire State and Philly Fed manufacturing, retail sales expected +0.5% (may be lighter due to high oil), housing starts/permits. Fed meeting Wednesday: no rate change expected. Even after the Iran deal, there's ~50% probability of a rate hike by December, but falling oil could reduce that. Kevin Warsh can frame inflation as transitory, with unemployment at 4.3% (full employment) and positive payrolls data.

Earnings season is largely over, so the focus is on economic data and the Fed.

Agrees and thanks Tom White.

Diane

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