The first half of the year delivered solid results for equity markets despite a bumpy June. The NASDAQ is up 25% for the quarter, a recovery that traces back to the market bottoming out at the end of March 2026 — precisely when geopolitical tensions picked up. Given that starting point, the strong gains across the equity markets are not surprising.

Several milestones stood out at the close of the quarter. The Dow and the Russell 2000 settled at record highs, and the S&P 500 equal-weight index also settled at a record high close. This broadening of the rally — strength beyond just the largest names — has lent support to investors and given them more optimism heading into the next stretch.

Earnings as the Engine, Valuations as the Caveat

The real lift behind the equity market's performance has been earnings. While valuations for the S&P 500 are stretched a bit, earnings have been great over the past few quarters, and that has supported the risk-on momentum seen across markets. With another earnings season just a couple of weeks away, more clarity on growth rates should follow, since those growth rates are what have been driving the market.

Near-Term Risks and Market Dynamics

Several factors could roil markets in the short term. Morning data including consumer confidence and the JOLTS report were on the calendar. The end of the quarter raises the question of repositioning: with equity markets at or near all-time highs, investors may rebalance going into the new quarter, which is a genuine concern. Liquidity and depth of markets could also be affected by the upcoming Fourth of July holiday, with Friday closed for markets — a thinning of participation that might add volatility.

On the more constructive side, there has been stabilization. Oil prices have settled just above $70 a barrel. Yields have started to stabilize as well, which is always a benefit for equity markets even when yields are elevated. Notably, when the debt and yield markets remain calm rather than volatile — even amid expectations for a rate hike — that calm sends an all-clear signal, at least in the near term, for equities. Overall there is a lot of minutia to digest, but the solid gains in Q2 and the first half of the year are hard to argue with.

Technology: Rotation Within the Sector

Technology was the standout, but the leadership shifted in an important way. The outperformers so far this year have been the chip and infrastructure names — SanDisk, Micron, Western Digital, and even Corning — all of which are part of the AI story.

What is happening is a rotation out of the MAG 7 and some of the hyperscalers, with money pushing into memory chip makers, storage chip makers, Broadcom, and the semiconductor equipment makers — Applied Materials, LAM Research, and KLA. These groups have picked up the slack for the weakness seen in Microsoft, Meta Platforms, Amazon (pulling back), and Alphabet/Google.

Meanwhile, specialty chip makers like AMD and Intel have outperformed severely. On the flip side, Nvidia has underperformed. The forward price-to-earnings ratios on AMD and Intel are getting a little ridiculous compared with Nvidia's. Part of Nvidia's relative weakness may stem from its growth trajectory and the "law of big size" — as the number one market cap company, sheer scale makes further outperformance harder. Encouragingly, investors are pivoting between these sub-sectors rather than abandoning the market altogether, which lends support broadly.

AMD's Price Target Hike

AMD received a price target increase to $615 from $505 at Wells Fargo, adding to a series of price target hikes for the company. The analyst's focus is on the CPU side. CPUs were largely forgotten in 2024 and 2025, when all the attention was on GPUs and the market share Nvidia was capturing there. Now that focus is broadening back toward CPUs. Nvidia still holds roughly 90% of the GPU market in advanced chips, but AMD is making inroads with the MI350 and the upcoming MI450. The persistent caveat: valuations for both AMD and Intel are getting extremely stretched and bear watching.

Financials: Oppenheimer Downgrades

Oppenheimer issued a note cutting price targets across several financial names. Money center banks such as Citigroup, Bank of America, and JP Morgan posted solid gains so far this year. The firm now downgraded its price targets on Citigroup, Bank of America, Morgan Stanley, and Goldman Sachs.

The reasoning is nuanced. Oppenheimer still regards Morgan Stanley and Goldman Sachs as best-in-breed at what they do and expects trading revenues to remain strong, with M&A activity having picked up — a positive for both firms. The negative is valuation: these stocks have had spectacular runs. Making such a call right before earnings season — with reports from these financial companies due in the next two or three weeks — is dicey, and the Oppenheimer view could prove right or wrong.

The note also highlighted underperformers, particularly in private equity. Names like KKR, Blackstone, and Ares have underperformed significantly, down roughly 20% to 35% so far in 2026. The downgrade may reflect a recalibration — rotating toward undervalued stocks within the financial space while trimming names whose valuations have stretched after strong runs.

Super Micro Under the Microscope

Super Micro lost major ground after news that its offices abroad were raided. This is not surprising, as it follows earlier raids in May, and the stock has been getting pounded over the last week on the news.

Prosecutors are targeting six individuals with charges focused on document forgery and breach of trust; their identities were not revealed. This follows a May action in which authorities arrested three people and seized 50 servers as part of a collaboration with Taiwanese authorities.

The broader context is a robust black market for high-end data centers and servers. A note a couple of weeks ago covered Nvidia, with Jensen Huang pushing back against the narrative that some of the company's products are reaching China. The likely reality is that this technology is finding its way there regardless. Last year, reports indicated a lot of flows were going through Singapore; now the channel appears to be Taiwan. There are currently no laws in Taiwan governing sales to China, but the Taiwanese government has signaled such laws may come onto the books shortly.

The implications: Super Micro has been struggling, and that may be a bonus for Dell and HP Enterprise, which could take market share in this space. The US government is clamping down on what can be sold into China, especially anything that might end up in military use. Big Chinese tech companies want all of this technology and are obtaining it somehow. With these raids becoming commonplace, the trouble for Super Micro is unlikely to go away anytime soon, as IP and technology continue reaching hands the US government does not want it to reach — which explains why the stock was dinged so heavily.