Wall Street Roundup: carving up the AI trade

Brian Stewart, Seeking Alpha's Director of News. Always great to talk to you on a Friday at Wall Street Roundup. Welcome back to the show. It's great to be here. Talk to us. What is top of mind this week in July? Pretty light week in terms of especially corporate news. We're coming off the July 4th holidays. is kind of the summer doldrums in general, just vacations everywhere on Wall Street. So in a way, not too much going on, not a lot of catalysts. We had, I think Iran was probably the biggest sort of macro headline guiding things this week, though I think we're all just sort of used to the fact that we're in some sort of dark situationship with Iran at this point. You know, it's not clear what our relationship is or what it's going to be, but we're working it out. So I think that's going to continue for the foreseeable future. And I think the market has just sort of decided to not think too hard about it unless something really concrete, either good or bad, takes place. Meanwhile on sort of the AI front, I think the big news this week was SK Hynix. It's a South Korean memory chip maker is preparing its IPO. It raised $26.5 billion of selling its ADRs priced at $149 a share per ADR. Scheduled to start trading on Monday. So that's going to be a good litmus test of the amount of demand that's out there for new AI issuances. Micron just as sort of a comparison is down about 22% from the highs it reached about two weeks ago. It hit highs just as his earnings were coming out and has been kind of drifting off that lately. So there's some signs that there might be kind of the AI, at least in sort of the memory chip area, might have overstretched a little bit. So I think SK Hynix will be a good test of where we're at on that. Will it also show us more insight into the American players and how that's kind of working out and the division between what's happening in America and what's happening over in Asia? Yeah, I think the more information we have, the better in terms of that. Like every sort of way you can carve up the AI trade I think is useful for investors Because I think that been the conversation that been going on on Wall Street is the sort of a realization I think is useful for investors because I think that been the conversation that been going on on Wall Street is the sort of a realization I think 2026 is the sort of the realization that there's going to be winners and losers in the AI trade rather than just sort of, all lines go up situation. So I think the more that we can kind of look at all the different ways in which the market is operating along those lines, Taiwan Semiconductor has earnings next week next week is the beginning of earnings season financial stocks are going to be in the real spotlight but just in terms of tech um taiwan semi is going to be the the big name that's releasing next week so in terms of just getting kind of a glimpse of the the asian situation as it comes to chips and ai i think that's those are both going to be important pieces of information and speaking of that ai trade and and straight lines don't only go up micron was down this week and for those was interested in the quant perspective. We had a talk with Steve Kress this week about that was one of his main picks of the year and a little update there on how it's doing. But yeah, what would you say about Micron and its place in the market and what it portends for investors on the tech side of things? It's interesting to me how volatile Micron has gotten on a day-to-day basis and not really requiring a catalyst to move around. You know, if you just look back at the last, say, two, three weeks of the daily change in Micron, you'll see down 10%, up 5%, down 6%, just sort of bouncing around in a very high beta way. So I think that just sort of points to the overall jitteriness of the market. You know, like every kind of wind blowing in one direction or another is really catching sail, I guess, is the metaphor that I'm stumbling towards. But I just think that the world we're in, you know, a year, 18 months ago, where AI was definitely the future, just as much money as you can, you know, shake out of the mattress and find in your old pants pockets, put it into AI and it'll eventually work out. I think that people are a little less sure that that's the case. I think there's an argument to be made that a lot of the benefit of AI, at least in the near term, has already been priced into a lot of these stocks. And everyone's kind of looking around to see either confirmation of that or some sign that, no actually there another substantial near term growth possibility out there Yes lots to be paying attention to along the way What other stock news do you have for us So just checking on the consumer, like I said, there wasn't a lot of earnings, especially this week, but we did get PepsiCo announcing its earnings. It dipped 3% following results. Revenue beat expectations. It was helped by overseas strength. However, the company warned that the consumer is feeling the pinch of higher prices, especially in impulse buys. So there's just a rising wallet consciousness among consumers that Pepsi's pointing out. People are getting a little bit more strict about their budgets. They're not sort of willing to grab that Pepsi on the way out of the store kind of situation. On kind of a similar front, but kind of the opposite bit of news. So Delta also dipped after its earnings, but it was able to overcome higher fuel prices through higher prices. And it specifically pointed to strong travel demand. So you have Pepsi kind of warning about consumers not having as much money as they used to and pulling back on purchases. And you have Delta saying that there's strong travel demand. Now this could point to sort of a bifurcation among consumers because obviously people who are booking vacations and traveling a lot for either business or pleasure, are probably higher income consumers where Pepsi is snacks and sodas and things like that. So they might be operating in sort of the lower income areas. So you might see that split being kind of put into action there. But there are some signs of caution about the impact that inflation is having on overall spending. Anything else, Brian, for this week? No, just looking ahead, earning season, like I said, is coming up. Financials are going to be in focus. You have stocks like Citi and Goldman and JP Morgan, Bank of America, Wells Fargo, all reporting early next week, starting Tuesday and kind of rolling into the rest of the week. Financials have had a pretty good run lately. They're up about 17%. I'm looking at the XLF right here, up about 17% since March, which was sort of the high point of Iran concern was in sort of the mid to late March period. So you see a lot of stocks hit kind of a near term multi-month low in the March time period. So since that point, you see the financials are pretty strongly, but not quite to where they were in January, which was their high for the year, but they're almost there. So overall some excitement, but I also think kind of a wait and see attitude going into the earnings reports There also kind of a split within the sector So you see like Citigroup and Goldman are both up about 20 year to date But meanwhile Wells Fargo is down 6% and JP Morgan and Bank of America are both up, but to a lesser degree. There are kind of stock picking situations going on in financials. So I think we're going to get a lot of information from them next week and that's going to set the stage for whatever's is going to happen next. We had Clem Chambers on investing experts, and he was talking about going down the value chain to wit these financial stocks. I'm just going to quote for a second. I'd be happy to hear your thoughts if you have any afterwards. So he says there are other stops on that chain of value in AI, and I think people haven't put two and two together just yet. For example, Goldman Sachs. I mean, what a wonderful company. Pays a nice dividend. Cheap as chips. I mean, way cheaper than chips at this point. Chips are expensive now. And who's going to be doling out all this investment money? Who's going to be doling out all the money that they're going to have to print to onshore American industry to build out AI? It's going to be those investment banks again, isn't it? If you have any thoughts, happy to hear them. But I thought that was a really nice take on a oversaturated, you know, stock picking kind of market. I thought that was an insightful point that I hadn't heard before. Yeah, absolutely. Yeah. Chips being expensive, obviously, is exactly what PepsiCo is saying. And the various chips that are available to purchase at this point in different sectors. Exactly. Yeah. I was just thinking about like chips, chips and the shrinkflation. You open a bag of chips and there's only three of them in there. Totally. Totally. It works on so many cons, which is the beauty of this. Exactly. But in terms of Goldman and AI and just sort of who the winners are going to be, I do think that that's part of that conversation I was talking about before about winners and losers and kind of looking under the hood or looking into the future and, okay, so who's next? We know that this is going to be a super powerful tool. We've been very focused on the infrastructure play and maybe sort of the next level, the hyperscalers and things like that. But there's lots of companies whose businesses are going to change dramatically in ways that are going to make them extremely more profitable in the future. And so finding that sort of next wave, I think it's part of the discussion that's going on. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com slash WSB. And join the highest level discussion of any stock or ETF with our community of serious investors like you. Find us at SeekingAlpha.com slash subscriptions.