Written by: Trend Research

On Wednesday, during the trading session, the S&P 500 experienced three consecutive declines, London gold fell below $4000, WTI crude oil dropped below $70, and Bitcoin fell below $60,000. The dollar index reached a new high in 13 months, putting pressure on commodities, cryptocurrencies, and equities simultaneously. However, after Micron's earnings report, which was explosive, the stock price surged over 13% in after-hours trading; Qualcomm also announced its entry into AI data centers on the same day, rising more than 10% after hours. These two events shifted Thursday's pricing logic from "Will AI demand end?" back to "Can chips lead the recovery?"

Market Performance

The S&P 500 dropped 0.10% to 7358.22 points, the Nasdaq fell 0.43% to 25476.64 points, the Dow Jones increased 0.35% to 51848.90 points, and the Russell 2000 rose 0.37% to 2986.63 points. The technology and communication sectors dragged down the Nasdaq, while the Dow and small-cap stocks were supported by non-tech sectors. The VIX closed at 18.63, down 4.41% from the previous day.

Micron closed at $1048.51, surging over 13% after releasing its earnings report post-market, while SanDisk and Western Digital also rose in after-hours trading. Qualcomm dropped 3.3% during the trading session but jumped over 10% after hours. SpaceX fell about 1% to $154.54, having retreated over 31% from its high of $225.64 since going public.

The commodity end is also under pressure. WTI crude oil fell 4.6% to $69.87, reaching its lowest since March 2; Brent crude oil dropped 4.1% to $73.65. The yield on the 10-year U.S. Treasury bond fell 9 basis points to 4.407% alongside the decline in oil prices, returning to levels seen before the Fed's hawkish dot plot was released last week; the 2-year yield stood at 4.152%. Bitcoin fell 5.4% during the session to touch $59023, its lowest since October 2024. London gold fell below $4000, the first time in seven months. The dollar index rose to a 13-month high.

Macro and Outlook

Micron's revenue for the third quarter was $41.46 billion, a year-on-year increase of 346%; Non-GAAP EPS was $25.11, with a gross margin of 84.9%, all significantly exceeding expectations. Core data center revenue reached $11.5 billion, nearly 70% higher than market expectations, directly addressing the biggest question in the market over the past three days about whether AI memory demand can continue. The guidance for fourth-quarter revenue has a midpoint of $50 billion and EPS of around $31, exceeding consensus by 16% and 22%, respectively. Micron's CEO explicitly stated that the HBM supply tightness will persist until after 2027, locking in $22 billion in forward revenue through 16 long-term agreements.

On Qualcomm's investor day, Meta CEO Mark Zuckerberg confirmed via video that Qualcomm will become the CPU supplier for Meta's data centers, and Microsoft Azure indicated that it will deploy Qualcomm's HBC chips. Qualcomm raised its fiscal year 2029 non-phone business revenue guidance from $22 billion to $40 billion, a 91% increase. This company, which has long relied on mobile chips, proved that its entry into AI data centers is not just narrative but actual orders through clients like Meta and Microsoft.

The most crucial pricing variable in today’s market is the May PCE. The market consensus expects core PCE year-on-year to rise from 3.3% to 3.4%. If the data turns out to be hot again, the September rate hike will shift from speculation to consensus, endorsing the hawkish path of Kashkari, while the post-market rebound of chip stocks will face direct hedging from interest rates. However, oil prices falling below $70 have already pulled the 10-year yield down by 9 basis points. If PCE softens with energy disinflation, the speed of repricing rate cut expectations could exceed anyone's forecasts. The PCE and Micron's earnings report are both set to be released today.

The fundamental driver behind oil prices falling below $70 is the substantial deblocking of the Strait of Hormuz, with trapped tankers in the Gulf gradually sailing out, leading to a reaccumulation of supply expectations, and the geopolitical premium has been fully dissipated within weeks.

Trend Perspective

The market's movements on Wednesday communicated one thing: the sell-off in the previous three days was not just about chips, but a lack of trust in the entire AI infrastructure narrative. Gold, oil, and Bitcoin breaking below key levels on the same day indicate that this wave of selling pressure is not a single-point risk but a systematic hedge against an environment of high valuations, high interest rates, and high leverage.

Micron's earnings report changed the most critical link in this logical chain. Data center revenue of $11.5 billion versus an expectation of $6.8 billion shows enough of a disparity, and this is not a seasonal fluctuation; demand is accelerating continuously. The panic instigated by rumors of SK Hynix cutting production was countered by Micron's own order book. Qualcomm securing CPU contracts with Meta and Microsoft indicates that semiconductor ecosystems outside of Nvidia are also accepting the overflow of AI capital expenditures. With these two developments together, the bulls have a clear supporting logic today.

However, the PCE is a hard constraint. If the PCE is hot, the rate hike expectations could overshadow the sentiment brought by earnings reports, and any post-market gains could be easily negated by interest rate logic. The true direction will become clear only after the PCE is released.