Sponsored by
Weekly Newsletter
🏦 Bank Earnings Wrap
🤖 The Asymmetry of AI CapEx
🇨🇳 China Turns Up the AI Heat Again
📈 Positive Catalysts Ahead
🍎 Apple Overtakes NVIDIA in Market Cap
💼 Strong Earnings Continue
QUOTE OF THE WEEK:
“With this model, it's as expensive as many of the frontier models, but I would argue that's not necessarily what matters here. What matters is it's as good as, if not better than, the frontier models in the United States. And because it's open source, you have millions of developers around the world who are going to try to drive the cost down and find efficiencies. So I would bet within weeks it will be very cost-competitive.” - Tenex co-founder and co-managing partner Arman Hezarkhani
KEY US ECONOMIC EVENTS NEXT WEEK:
MARKET CLOSE:
WEEKLY MARKET WRAP:
Good Afternoon. Negative week for the markets with tech-heavy Nasdaq recording the most losses, thanks to panic caused by a new Chinese open-source AI model - KIMI. This development is perceived negatively, similar to the Jan 2025 DeepSeek panic. Even then, I had mentioned that the markets were overreacting, and it's clear that the same is happening now. More on this below -
Below are the key things to note this week:Same panic as DeepSeek moment:
Kimi K3 is another reminder that the AI model layer is becoming more competitive, but the market’s familiar conclusion—that cheaper Chinese models undermine the infrastructure buildout—still looks too simplistic. The more relevant metric is not token price, but the cost of completing useful work. K3 appears highly competitive on coding and agentic tasks, and its open weights could allow developers to improve efficiency quickly, although several claims remain unverified until the full weights are released on July 27.If model costs continue to fall, adoption should broaden across agents, software, and enterprise workflows, increasing aggregate inference demand rather than eliminating it. The greater pressure may fall on frontier labs, which will need to differentiate through applications, enterprise tools, and distribution rather than relying primarily on model access. Hyperscalers and semiconductor suppliers, meanwhile, could still benefit from rising usage across the stack. Cheaper models do not necessarily kill the AI buildout—they may accelerate it.
Multiple positive catalysts ahead:Earnings growth - Earnings season started very well, with all major companies reported to date beating the estimates. Earnings growth for the S&P 500 is expected to be 23.3% YoY. If achieved, it would mark the second consecutive quarter with earnings growth above 20%, the strongest back-to-back performance since the post-pandemic recovery. All 11 S&P 500 sectors are expected to report year-over-year earnings growth, with Information Technology, Energy, and Communication Services leading the gains.
Market pricing for an unlikely Fed hike - The market is currently pricing a rate hike later this year, which, in my opinion, is very unlikely. Even with the looming geopolitical risks, oil prices are not rising as they did during previous conflicts. Also, the softer labor market puts pressure on prices, and inflation should remain steady or decline. In addition, soon PCE calculation methodology is scheduled to change and its exp’s expected to lower PCE by 10-15 bp.
Both these factors should help the market to propel higher despite volatility due to war and AI jitters.
For the week:
CNN's Fear & Greed Index now stands at 37 (Fear) out of 100, down 12 points from last week. Details here
The top five trending stocks on Reddit are Micron, SPY, SpaceX, QQQ, and Sandisk. Read More
Liquidity:
Banking Reserves + ON RRP: Banking reserves remain at approximately $3.1 trillion. ON RRP balance remains immaterial.
Standing Repo Operations: The New York Fed’s standing repo operation (primarily reflecting SRF take-up) is $0.
Here is a summary of this week’s key economic releases:
Target Rate Probabilities for July 29th FOMC Meeting:
CURATED INSIGHTS & ANALYSIS:
Key Takeaways from Bank Earnings:
Capital markets have reopened. Trading, investment banking, and equity underwriting drove another quarter of outsized earnings, confirming that companies are once again raising capital, pursuing M&A, and returning to public markets.
Credit still isn't the problem. Consumer and commercial credit quality remained remarkably resilient, with little evidence that higher interest rates are translating into broad-based stress. Credit was expected to be the story this cycle—it remains a non-event.
Businesses are borrowing again. Loan growth returned across much of the industry, while deposits remained healthy. After two years of cautious balance-sheet management, demand for credit is beginning to recover.
Banks are getting more profitable. Revenue growth outpaced expense growth at most institutions, expanding margins and supporting another round of dividend hikes and share buybacks. Operating leverage is finally working in the banks' favor.
AI is moving from pilot to production. Management teams increasingly discussed AI in the context of client onboarding, payments, servicing, and internal workflows rather than future potential. The conversation has shifted from experimentation to deployment.
The market looked past the beats. Strong earnings were largely expected. Investors focused instead on second-half guidance, expense discipline, and whether today's exceptional capital-markets environment can persist.
Bottom Line
Taken together, the first major earnings week painted a picture of an economy that remains far healthier than many expected. Capital markets are functioning normally again, credit is holding up, and businesses are borrowing and investing. The debate is no longer whether the economy can withstand higher rates—it is whether this unusually strong capital-markets backdrop can last into 2027.
The Asymmetry of AI CapEx:
The market hasn't waited for the AI ROI debate to resolve — it has spent the past year favoring the companies supplying the infrastructure over the hyperscalers funding it. The numbers make that preference explicit: over the trailing twelve months, the Magnificent Seven returned 17.8%, a rounding error from the S&P 500's 18.4%, while the semiconductor companies cashing their capital-expenditure checks returned 90.8%.
A 73-point spread is not indifferent — it is the market pricing two competing fears at once: that AI returns never arrive, and that the spending never stops. Those fears cannot both mature. If AI delivers meaningful utility, today's excess capacity becomes tomorrow's earnings engine — workloads absorb infrastructure that has already been built, and incremental revenue flows through a largely fixed-cost base, turning the operating leverage that bears cite as a source of fragility into the mechanism of margin expansion. If returns disappoint instead, investment intensity moderates and free cash flow recovers. Either way, one of the market's largest valuation overhangs begins to lift. A year of relative starvation has priced the corridor between those outcomes.
That is what makes the setup asymmetric from here. After twelve months of relative underperformance, expectations have reset to the point where the hurdle is no longer perfection — it is simply continued evidence that AI demand is real enough to earn on the capacity already in place. A year of underperformance is not evidence that the spring is broken. It is the compression.
FRONT PAGES:
Warsh Pledges "Regime Change" in Debut Testimony: In back-to-back House and Senate hearings Tuesday-Wednesday, Warsh said inflation will be "a thing of the past" and criticized the Fed's 2020 flexible average inflation-targeting framework. Refused Warren's request for a dot of his own. Called the AI capex boom "a good family fight" — his own view being that supply will catch up to demand, distinguishing it from oil-shock inflation. October hike odds fell to ~50%. Read
US Restarts Iran Blockade; Oil Spikes: Trump reimposed the Iranian port blockade Monday. The US disabled an empty tanker headed to Kharg Island on Wednesday — the first vessel hit since the blockade restart — and launched a fourth consecutive night of strikes. Trump initially proposed a 20% Hormuz toll, then dropped it amid pushback from the shipping industry. Iran released an American detainee on Wednesday. Trump warned strikes "get really bad next week" without a deal. Read
Trump Unveils ~$10B in Defense Investments at PA Summit: At the Pennsylvania Defense and Innovation Summit in Carlisle, Wednesday, Trump announced nearly $10B in new military manufacturing investments — funded within his $1.5T defense budget. Focus on shipbuilding, submarines, trucks, and munitions to replenish Tomahawk, Patriot, and THAAD stockpiles depleted by the Iran war. Extends last summer's $90B PA Energy Summit as the administration's swing-state industrial-policy playbook. Read
Apple Overtakes Nvidia as World's Most Valuable Company: Apple closed Friday at a $4.88T market cap, edging past Nvidia's $4.86T — first time on top since April 2025. NVIDIA had held the crown since June 2025, when it surpassed Microsoft and became the first company to cross $5T in October. The rotation reflects investor fatigue with AI capex — Apple's services + ecosystem model, which sidesteps hyperscaler infrastructure spending, is winning favor as Wall Street reprices the returns on the AI buildout. Read
Anthropic Kicks Off IPO Investor Meetings: Goldman Sachs, Morgan Stanley, and JPMorgan started scheduling institutional investor meetings this week ahead of a targeted October Nasdaq debut at Anthropic's $965B valuation. OpenAI filed confidentially in June but has since pushed its listing to 2027, giving Anthropic the first-mover advantage to set the AI listing benchmark. Wilson Sonsini — Google's 2004 IPO counsel — is advising. Read
EARNINGS UPDATE:
JPMorgan. Adjusted EPS $6.14 versus $5.59; adjusted revenue $52.4B, a beat. Reported EPS of $7.70 included $5.6B in one-time Visa and equity gains. Markets revenue set a record $12.1B as equities trading jumped 86%, and full-year NII guidance rose to $105.5B. Shares gained about 2%. A trading-led quarter, strong even without the Visa gain.
Bank of America. EPS $1.21 versus $1.13; revenue $31.56B, up 15% and a beat. Net income rose 27% to $9.1B; trading climbed 33% and investment-banking fees jumped 50%. Net interest income of $16.0B just missed. Management raised its operating-leverage guidance. Shares rose about 2%. Broad strength, with one soft line in NII.
Goldman Sachs. EPS $20.98 versus $14.47, a 46% beat; record revenue $20.34B. Equities trading hit a record $7.42B, up 72%; investment-banking fees rose 55%, and Goldman led the SpaceX IPO. The dividend was lifted to $5.00. Shares jumped about 8% to a record high. The cleanest blowout of the week, and all of it operational.
Wells Fargo. EPS $1.96 versus $1.73; revenue $22.62B, a beat, as fee income and trading carried the quarter, and the bank leaned into its post-asset-cap growth. Still, shares fell about 3%. A solid beat that had already been priced in after a strong run into the print.
Citigroup. EPS $3.15 versus $2.74; revenue $24.77B, a clear beat, with strength across markets and banking. But the stock fell about 5%, the sharpest bank reaction of the day. After a long rally, a good quarter became the cue to take profits.
ASML. EPS $8.68 versus $7.98; revenue $10.67B, a beat, with sales of €9.3B above its own guide. ASML raised its full-year revenue guidance for a third time to €43–45B and said 2027 is nearly fully booked. Shares rose about 5%. The AI-equipment order book keeps filling.
Johnson & Johnson. EPS $2.90 versus $2.84; revenue $25.31B, a beat, led by Innovative Medicine and MedTech. J&J raised its full-year sales and profit outlook. Shares rose about 2%. Steady, diversified, and quietly lifting the year.
Morgan Stanley. EPS $3.46 versus $2.89; revenue $21.35B, a beat, on strong trading and wealth-management fees. The result rounded out a record quarter for the Wall Street banks. Shares were little changed on the day. A great quarter, fully expected.
Taiwan Semiconductor. EPS $4.31 versus $3.82; record revenue $40.2B, up 34%, and at the high end of guidance. AI now drives 66% of sales, gross margin hit a record 67.7%, and full-year guidance rose above 40% growth. But capex was lifted toward $64B, and shares fell about 2%. A record quarter, taxed by the size of the spending.
UnitedHealth. Adjusted EPS $6.38 versus $4.91, a 30% beat; revenue $112.0B, a beat. The medical cost ratio improved to 86.7%, and UnitedHealth raised full-year EPS guidance to $19.50–20.00. Shares rose about 1%. A real step up after a brutal year, though management called costs still elevated.
GE Aerospace. Adjusted EPS $2.02 versus $1.86; revenue $12.63B, up 21% and a beat, on booming demand for engines and aftermarket services. Yet shares fell about 4%. One of the year’s best stories, sold off against a high bar.
Netflix. EPS $0.80 versus $0.79; revenue $12.56B, roughly in line. Operating margin slipped to 33.4%, and third-quarter revenue guidance of $12.86B came in below the Street. Shares fell as much as 12% to a one-year low. A fine quarter undone by a soft guide.
EARNINGS PREVIEW:
Date | Symbol | Name | Time |
22-Jul | PM | Philip Morris Intl | Before Open |
22-Jul | GEV | GE Vernova Inc | Before Open |
22-Jul | NEE | NextEra Energy | Before Open |
22-Jul | GOOGL | Alphabet Inc | After Close |
22-Jul | TSLA | Tesla Inc | After Close |
22-Jul | IBM | IBM Corp | After Close |
23-Jul | RTX | RTX Corp | Before Open |
23-Jul | TMO | Thermo Fisher | Before Open |
23-Jul | SAP | SAP SE | Before Open |
23-Jul | INTC | Intel Corp | After Close |
23-Jul | TMUS | T-Mobile US Inc | After Close |
24-Jul | AXP | American Express | Before Open |
VIDEOS OF THE WEEK:
One Account. Every Market. No Closing Bell.
Markets don't wait for Monday. News breaks on a Saturday morning, and most traders can do nothing but watch.
Not on Liquid. Trade domestic and international equities, commodities, forex, crypto, and prediction markets — all from one account, 24 hours a day, 365 days a year. Liquid gives you access to any market, from anywhere, anytime. To us, access is arbitrage.
Getting started takes under 10 minutes: log in with Google, deposit with Apple Pay or a bank transfer, and trade from your phone or desktop — wherever you are in the world.
While everyone else is refreshing headlines and waiting for the open, you're already positioned. That's the difference between reacting to markets and actually trading them.
Please Share This Newsletter With Your Friends.
Also, check my blog here.
This newsletter's content is for informational and educational purposes only and should not be considered trading or investment recommendations. All the opinions in this newsletter are personal and do not belong to any organization.
