WS #16023

Geopolitical escalation remains the dominant market driver, with the US signaling massive conventional aerial attacks on Iran while ruling out nuclear strikes. This development sustains the escalation narrative, pressuring the Strait of Hormuz and elevating energy and defense sectors. Concurrently, the US is intensifying pressure on Russian energy infrastructure, with Putin vowing retribution for data center attacks, adding a secondary energy supply risk layer. In the technology sector, a divergence is emerging. While the broader semiconductor index (SOXX) is down over 2% with broad selling across Micron, Intel, and AMD, Nvidia remains flat, suggesting a crowded long squeeze rather than a fundamental demand collapse. Apple's iPhone Duo pre-orders are live, providing a specific catalyst for AAPL, while Meta's release of the open-weight Muse Spark model signals a shift in the AI infrastructure landscape. Microsoft continues to secure massive energy contracts, reinforcing its role as a stable hyperscaler credit. Credit markets are showing significant stress in the AI infrastructure space, with CoreWeave facing 60% default odds in credit swaps, a stark contrast to the broader tech rally. This highlights a bifurcation in the AI trade: infrastructure builders with high leverage are under scrutiny, while established players with strong balance sheets remain resilient. Meanwhile, stablecoin adoption is accelerating, with Circle expanding to 40 new markets and Japanese megabanks completing a yen-stablecoin trial.