A Split Market: Tech Bleeds While the Rest Holds
A dark cloud sits over the market this week, driven by a clear split. Tech is getting hammered, chip stocks most of all, on both the memory side and among makers of semiconductor equipment. Yet the S&P 500 equal-weight index rose 1% yesterday. There has been no full selloff across sectors. This is a rotation trade, money moving out of recent winners.
Memory chip stocks made parabolic moves. Intel and AMD had climbed hard. Now investors are rolling out of those names and into safety: staples, utilities, real estate. Because information technology is such a big part of the major indexes, it drags the whole market down.
The numbers show the split. The Nasdaq 100 is down about 2.7% so far this week and looks set to fall another 1.5% today. The S&P 500 finished yesterday only 1.1% below its record high and stays above its 50-day moving average, while the Nasdaq has dropped below its 50-day average. The DRAM ETF, which holds many of those hot memory chip stocks, is down 17% this week. The SMH is down 7% this week, before this morning's added losses.
Some Magnificent 7 names bucked the trend. Amazon is up this week. Apple hit record highs today and got upgraded. Microsoft rebounded from recent lows.
Apple as a Safety Play
Apple is holding up against sector-wide pressure. Anyone who sold at the end of last year may have booked a gain but missed this year's gains. HSBC upgraded it this morning, raising the price target to 366 from 260, maybe a little late.
Apple now reads as a safety play for two reasons. First, the super cycle has passed, and Apple is raising prices to cover higher component costs, a positive. Second, the capex gap. The top five or six hyperscalers have spent over 750 billion so far this year. Apple spends only about 2.5% of its revenue on capex, while hyperscalers run near 40%. That gap, plus a rock-solid balance sheet, feeds the safety trade.
Analysts believe the launch of AI features and a strong product pipeline can drive most of the next upgrade cycle. New phones arrive in September, including a foldable, the Ultra. Apple will likely have to raise iPhone prices; it already raised iPad and Mac prices by $100 each. In a K-shaped economy, buyers of iPhone Max and Pro models will probably pay an extra $100 to $200 because input component prices have risen so much. No pricing has been confirmed. The pitch is the handheld device everyone owns that runs AI, with over 2.5 billion iPhones out there, a base unlikely to give them up soon.
Apple also shook off overseas news of Kimi 3, which feels like another DeepSeek moment. A note said Chinese tech makers will put their Qwen AI models onto Apple products. That is not a game changer, but it broadens the partnerships Apple relies on. Apple has lagged on innovation, especially the Siri upgrades, which are hard to see the point of. Leaning on partnerships to build out AI products is probably a benefit for Apple going forward.
Rising Geopolitical Risk
A sixth straight day of strikes on Iran is pushing risk higher, not lower. Crude oil popped back to $80 a barrel this morning. The next targets may be infrastructure, possibly bridges, which pressures risk-on assets.
The fragile truce may be unraveling. The old pattern was a strike followed by positive talk of continued negotiations and mediators stepping in, whether Qatar or Pakistan. That reassuring talk has gone quiet, so the geopolitical cloud is building. Centcom reports around 50,000 service members in the region. No boots on the ground have been declared, but the question is whether Kharg Island gets targeted. Traffic in the Strait of Hormuz is at three-to-four-week lows and still falling, even with the blockade and a US pledge to help ships pass. That raises the chance of another uncertainty spike toward $100 a barrel. Clarity may come over the weekend on whether talks resume and what hitting Iran's infrastructure would do to markets.
Netflix: Still King, But Stuck
Netflix shares are under pressure. One view calls it just another player in streaming, once the king. My read: it is still the king and has a full headlock on its competitors. The consumer is simply making different choices now.
Netflix beat EPS by a penny; revenue came in a little light. The main worry is guidance. After raising prices, results roughly met their goals, but the company said it will give little forward guidance and will report what users watch only once a year, starting in 2027. That kind of comment hurts investor sentiment. Netflix says its content is healthy and live events are drawing new members, with membership still growing.
The catch: Netflix now leans on metrics like hours watched, and live events do not lift that number. They are one-off products. They add subscribers but do not build lasting viewing hours, which is what investors and analysts track. Adding more live events, whether the NFL or the women's World Cup next year, would likely be a boon but raises the cost question, at what price. A free version was discussed, but that could strip paying subscribers from the paid tier. Netflix sits in a kind of no man's land. Analyst calls today are all to the downside, no surprise given clouded guidance and stagnating growth, a big red flag.
SpaceX Falls Below Its IPO Price
SpaceX shares are lower in the pre-market and are indicated to open below the IPO price. Short sellers are lining up. Betting against an Elon Musk company still seems risky.
Be careful what you wish for. A report from S3 Partners says shorts now hold up to 29% of the publicly traded float. When shorts pile into a meme stock, retail investors sometimes come in to rescue it, and short squeezes become possible daily. This follows a canceled launch last night, when some engines failed to ignite. Musk tweeted the launch will likely slip a couple of days, with a target within the next few days. Canceling a launch beats having in-flight problems, so that is a positive.
With short interest this large and the stock below its IPO price, the question is whether retail steps in to rescue the company. Musk-backed companies tend to trade more volatile, with a higher beta than many investors like.
