A Market Reorienting Around a More Serious Fed
Looking beyond equities, the dominant story across asset classes right now is the market's growing belief that a Kevin Warsh-led Federal Reserve will be more serious about solving inflation in the near term. The expectation is that the Fed will first work to gain credibility on inflation so that it can later pursue the sweeping reforms laid out in its initial press conference.
This belief is visible in the Treasury market. In the days and hours following that press conference, the curve exhibited "bear flattening" — a technical way of describing a situation where short-term interest rates rose at a faster pace than long-term rates. Alongside this, the US dollar began to firm up against other currencies worldwide.
These moves have rippled out into markets well beyond Treasuries and the dollar. Gold, although it has bounced off its lows by roughly one to two percent, is sitting near its lowest levels in quite some time, down around $4,000. Bitcoin is below $60,000 and simply cannot seem to recover — even when there is a partial rebound, it sheds more ground. Although gold and Bitcoin are very different assets with different trading characteristics, the one belief that unites the traditional gold bug and the dedicated Bitcoiner is a distrust of fiat currencies, particularly the US dollar, and of monetary policy — largely because inflation erodes their value over time. When the Fed turns more hawkish and signals seriousness about maintaining the strength of the dollar, that policy works directly against these inflation hedges, which is why both gold and Bitcoin are under pressure.
The Tech Selloff: Check-Writers vs. Check-Collectors
The tech selloff is intertwined both with the question of where the Fed goes next and with the heavy spending sweeping through the technology sector, which is being penalized once again.
A clear divergence can be illustrated by indexing the hyperscalers against the companies that supply them with what they are trying to buy — in other words, those collecting the checks versus those writing them. These two groups are now moving in opposite directions. The reason is that the seemingly endless pool of free cash flow from the mega-cap tech firms has been depleted. Having drained those assets, these companies are now turning to the equity markets and to the debt markets to raise capital.
Oracle serves as the early warning signal — the "canary in the coal mine" — for this dynamic. Roughly six to twelve months ago, Oracle began taking on tremendous debt to fulfill its backlog, and it started losing value back in the fall of last year, well before this pressure spread to some of the Magnificent Seven names.
Why Memory Chips Behave Like Oil
A useful comparison here is oil. When oil spikes, it does increase inflation at the initial onset of whatever conflict or shortage triggered the spike. But spending money on oil is not a productive use of capital — businesses, consumers, and drivers were already going to spend on it. A price spike simply diverts more funds toward that same purchase, and the oil companies themselves do not bring new money into the economy.
The same logic now applies to memory stocks and memory chips, which are a commodity. This was visible with both Apple and Microsoft. Companies that had budgeted a certain amount of money for these commodity memory chips no longer have a sufficient pool set aside for what they need. As a result, they must increase consumer prices and absorb pressure on their margins. While this is initially net positive for inflation, it is net negative for the economy because it is not a productive use of capital — it is not new research and development, but simply more money paid for the same thing the companies were already going to buy.
Oil: Long, Drawn Out, but Deescalated
Oil is trading lower once again, having earlier fallen below $70 a barrel; WTI is sitting right around $70, just a touch below it by roughly a penny. The situation appears long and drawn out but significantly deescalated. Until there is "pen to paper" on a resolution, more of the same is likely. The primary risk is escalation, though that is probably not a high-percentage outcome at the moment.
ON Semi's Acquisition of Synaptics
ON Semi shares were getting hit in the pre-market over a deal with Synaptics that Wall Street does not appear to like. Part of the negative reaction stems from the fact that it is an all-stock deal, which carries dilution and therefore tends to put downward pressure on the buying company's stock.
ON Semi has agreed to buy Synaptics in an all-stock transaction that values the company at about $6.2 billion, with a total enterprise value including debt of roughly $7 billion. The deal is expected to close in mid-2027, subject to approvals. Some analysts have pointed to the acquisition as a move toward more consumer products, viewing that as a concern. Time will tell, but the initial reaction was not especially positive.
OpenAI Weighs Delaying Its IPO
A report indicates that OpenAI may be pushing out its IPO timeline, leaning toward delaying it until next year. Bankers are reportedly cautioning against the recent tech volatility as well as the initial performance of SpaceX's offering. OpenAI has already filed but does not have a firm timeline set out.
The CEO is pushing for a trillion-dollar valuation, and the market does not necessarily believe that valuation is supported right now. The strategy behind a delay appears to be reestablishing the company's standing — with competitors such as Anthropic gaining momentum — and reinforcing its position as a perceived leader in the space, which it still is, even as others gain ground.
This is a competitive landscape, and there is genuine concern about how much liquidity will be available for these large IPOs. The pace of IPOs is already running more accelerated this year, with many issuers trying to get to market before the midterms. Whether OpenAI's offering happens this year or next remains to be seen.
