Written by: Chao Xiang Research

On Thursday, after the reopening of Hormuz, chip stocks reached a historic high.

The temporary agreement between the U.S. and Iran was officially signed in Geneva, and three Saudi supertankers crossed the Hormuz Strait on the same day, while the hawkish impact from the FOMC was suppressed by geopolitical good news. The S&P rose over 1%, the Nasdaq rose nearly 2% reversing two consecutive declines, the Dow closed at a new high for the third day of the week, and the Philadelphia Semiconductor Index surged over 6% setting a new historical high. Energy stocks collectively suffered losses as oil prices fell, making it the only losing sector of the day.

Market Performance

The S&P 500 closed up 1.08% at 7,500.58 points, the Nasdaq rose 1.91% to 26,517.93 points, the Dow rose 0.14% to 51,564.70 points, and the Russell 2000 led the gain with a 2.12% increase to 2,979.77 points. The growth rate decreased from small-cap to large-cap, with the Dow almost flat, indicating that the main force driving the rebound was the high beta varieties that had fallen the most in the previous two days, while defensive and blue-chip stocks did not keep up. The news regarding the U.S.-Iran agreement had been fully priced in before the market opened, and the index maintained a stable upward trend throughout the day, recovering most of the drop caused by the FOMC impact by the close.

Trump confirmed in the early hours on Truth Social that Apple and Intel reached a design and foundry cooperation agreement, initially taking on mature process chips for iPads and older models of iPhones, while flagship products will still be supplied by TSMC. The negotiations had been ongoing for more than a year, and Intel's foundry business secured the most significant external client through this deal, while Apple diversified its reliance on TSMC. Neither company has officially responded, and the market is pricing in directional significance.

Trump's same post also mentioned that Nvidia has agreed to produce the first batch of chips at Intel, and Musk has promised to co-build the largest wafer plant in history, TerraFab. The collaboration with Apple is the third piece of the puzzle in Intel's foundry landscape. Intel's stock rose approximately 10.5% to $133.82. Apple plans to raise prices due to soaring costs of memory and storage chips, with SanDisk rising over 11% and Micron rising nearly 9%, benefiting the entire storage supply chain. Nvidia rose nearly 3%, and the Philadelphia Semiconductor Index rose over 6% to set a new historical high, with the entire line from devices to storage to computing power on the rise, the long-term logic of AI capital expenditure remains valid even after the hawkish dot plot materializes.

SpaceX fell 3.56% to $185.00, closing down for the second consecutive day, with a cumulative drop of approximately 8.3% over two days. Bloomberg reported that the company is preparing to issue at least $20 billion in investment-grade dollar bonds to repay bridge loans maturing in 2027, with potential concerns about equity dilution compounded by the hawkish FOMC impact, creating dual pressure on the stock for two consecutive declines. However, it has still gained nearly 15% this week and is up 37% from its issue price since its IPO date, but short-term pressure has not dissipated.

The energy sector led the decline among the 11 sectors of the S&P; WTI crude oil fell about 2% to $74.29 per barrel, with ExxonMobil and Chevron both declining. The Dow index fell over 4%, as the reopening of Hormuz fully released the geopolitical premium, easing the annual gains that had been between 20% to 40% previously. The energy sector changed from being the biggest winner of the week to the biggest loser.

The technology, consumer discretionary, and industrial sectors jointly led the gains, as funds moved from defensive and energy sectors to the computing power chain. The money that flowed out of technology stocks due to the FOMC impact yesterday partially reflowed today due to the geopolitical good news, indicating that these funds have not truly left the market; they are just waiting for a reason to re-enter.

Macro and Forward-Looking

The VIX plummeted 11.06% to 16.40, with the panic triggered by the FOMC the previous day essentially dissipating within a day, indicating that the market's pricing of the hawkish dot plot is more of a technical hedge rather than true risk aversion. The 10-year U.S. Treasury yield slightly retraced to around 4.445%, while the 2-year yield remained above 4.18%; the market has not withdrawn the pricing for a rate hike in September, but has temporarily suppressed volatility due to improved risk appetite. Gold fell to $4,210 per ounce, silver also dropped, and the dollar index slightly retreated but remained high. Bitcoin (CoinGecko) closed around $64,026, while Ethereum closed around $1,734, showing that the crypto market did not react significantly to the geopolitical positive movement, and the suppression from hawkish expectations has not been lifted. Oil price for WTI closed at $74.29 per barrel, hitting a near three-month low.

Next week, PCE data, Flash PMI, and Micron's earnings report will be released in succession. Micron's guidance is the most direct barometer for AI computing power demand, and a lower-than-expected guidance last quarter had dragged the entire semiconductor sector into a significant day drop. The Russell Reconstitution will take effect at the close next Friday, and mechanically adjusting funds will lead to a significant increase in trading volume, raising volatility for small-cap stocks.

Chao Xiang Perspective

The rebound on Thursday had two legs: the U.S.-Iran signing released the geopolitical premium, and chip stocks confirmed that the AI main line is still in place with actual gains. Both logics are valid but have different durations. The geopolitical premium is one-time; once the agreement is signed, it is considered fulfilled, and if Iran has setbacks afterward, the market will react faster and more violently than the first time. The logic of chip stocks is more durable, as the synchronized rise of Intel, SanDisk, and Micron indicates that the market trend of the day has wide industrial chain width, with the pricing for AI capital expenditure supported by fundamentals. Behind SpaceX's two consecutive declines lies a new variable: once the $20 billion bond issuance is realized, the financing pressure and dilution expectations will become a continuous suppression of the stock price, rather than just a simple valuation adjustment. Next week's PCE serves as a recent touchstone; if the data is again higher than expected, the probability of a September rate hike will turn into consensus, and the Thursday rebound will just be a breather; if the data softens, the speed at which the market re-prices the expectations for a rate cut will be faster than anyone anticipates.