For much of the past year, the AI trade has been the engine behind Wall Street's rebound and record highs. Investors have accepted a grand bargain: tech giants may spend staggering amounts of money now, because the payoff later could be even more staggering. Data centers, chips, cloud infrastructure, new models, new tools: none of it comes cheap. But as long as the market believes the future profits will arrive, the spending looks visionary rather than reckless.

That belief took a hit this week after a report that OpenAI had missed internal targets for weekly users and revenue. One report does not end an investment cycle but it does make investors wonder whether the AI boom is simply too expensive and moving too fast.

The Nasdaq slipped 1% yesterday, while the Dow barely moved. After a powerful rally in tech shares, doubts about valuations and returns were always going to return at some point. Tonight's earnings from Microsoft, Alphabet, Amazon, and Meta will therefore matter far beyond the usual revenue beats and margin commentary. Investors will be listening for proof that AI spending is translating into real demand, real productivity, and eventually real profit. Microsoft and Alphabet dipped before the open, while Amazon and Meta were little changed.

Then there is Powell. Today's Fed decision is expected to be uneventful on the surface, with rates remaining unchanged, but this is likely Powell's last policy meeting as chair, with Kevin Warsh nominated to succeed him. Powell's final appearance comes at an awkward moment. Inflation is not fully defeated, oil prices are elevated, and the war involving Iran has complicated the outlook, especially because of the risks around the Strait of Hormuz, one of the world's most important oil shipping routes. If energy prices stay high, inflation could prove more stubborn. If the conflict damages growth, the Fed could face the old central-banking nightmare, with prices that remain too hot, while the economy stays too cold.

That is why Powell is unlikely to offer investors much comfort. The market may want hints of rate cuts, but the Fed has little reason to provide them. A cautious, even slightly hawkish tone would not be surprising. Powell has spent much of his tenure being accused of moving too slowly, too quickly, too much, and not enough: his final message will probably be less about pleasing markets than about protecting the institution he is leaving behind.

Back to the market, Robinhood fell sharply after missing profit expectations, and Seagate surged after offering an upbeat outlook, helped by demand for AI-related data storage. NXP Semiconductors also jumped after forecasting better-than-expected revenue and profit, while Visa and Mastercard gained as consumer spending remained resilient. Starbucks rose after raising its annual profit forecast.

Energy remains the wild card. Oil stayed elevated after reports that Trump told aides to prepare for an extended blockade of Iran, even as other comments suggested Iran might be moving closer to reopening the Strait of Hormuz. The United Arab Emirates' decision to leave OPEC adds another layer of uncertainty. It may ultimately mean more alignment with the United States and perhaps more supply over time, but a sudden surge in Gulf output looks unlikely given the constraints in the region.

Today's economic highlights:

Today's agenda includes: the annual and monthly inflation rates along with the RBA Trimmed Mean CPI in Australia; housing starts in Japan; preliminary inflation rates in Spain; consumer and business confidence in Italy; economic sentiment in the Euro Area; consumer and business confidence in Spain; in the United States, the MBA 30-Year Mortgage Rate, building permits, housing starts, durable goods orders, goods trade balance, wholesale and retail inventories, as well as the Fed's interest rate decision and press conference; in Canada, the BoC's interest rate decision, monetary policy report, and press conference; EIA crude oil and gasoline stocks in the United States. See the full calendar here.

  • Dollar index: 98.590
  • Gold: $4,574
  • Crude Oil (BRENT): $104.63 (WTI) $103.45
  • United States 10 years: 4.35%
  • BITCOIN: $77,131

In corporate news:

  • Seagate Technology shares surged premarket after fiscal Q3 earnings and revenue beat expectations and its Q4 outlook came in well above analyst estimates.
  • DCC said it is reviewing a cash takeover proposal from a consortium including KKR and Energy Capital Partners, sending its shares sharply higher.
  • Meta Platforms faces EU Digital Services Act charges over allegedly weak controls preventing children under 13 from accessing Facebook and Instagram, with potential fines of up to 6% of global annual revenue.
  • Robinhood shares fell premarket after weaker crypto trading volumes caused Q1 profit and revenue to miss expectations.
  • LG Electronics is reportedly working with Nvidia on humanoid robots.
  • Duracell will face a BASF lawsuit alleging theft of lithium-ion battery trade secrets after a judge rejected its bid to dismiss the case.

  • Philip Morris International said the U.S. FDA reauthorized IQOS as a modified-risk tobacco product.
  • Cognizant agreed to acquire Astreya for about $600 million to strengthen its AI infrastructure and data-center services capabilities.
  • SpaceX has tied part of Elon Musk's compensation to reaching a $7.5 trillion valuation and establishing a permanent human colony on Mars.
  • NIO shares rose after the launch of its new Onvo L80 SUV strengthened expectations for continued sales momentum.
  • House Democrats urged President Trump to maintain the U.S. ban on Chinese automakers selling or building cars in the country.
  • Starbucks reported stronger-than-expected same-store sales growth, suggesting its sales recovery is gaining momentum.
  • Visa posted higher revenue as consumer spending remained resilient and authorized a new $20 billion share buyback.
  • T-Mobile reported higher first-quarter revenue, supported by growth in postpaid customer accounts.
  • Pernod Ricard and Brown-Forman ended merger discussions after failing to agree on terms.
  • Mondelez reported higher profit and revenue, as growth in developing markets offset weakness in the U.S. and Europe.
  • Caesars Entertainment narrowed its loss as revenue rose across regional and digital operations.
  • Booking Holdings cut its outlook as the Middle East conflict weighed on travel demand.
  • Negotiations over a $500 million bailout for Spirit Airlines are reportedly at an impasse, according to Bloomberg.
  • Ametek is close to a deal to acquire Indicor's test and measurement division from CD&R for $5 billion, according to the WSJ.
  • Goldman Sachs has banned its Hong Kong bankers from using Anthropic's AI.
  • Copa announces the purchase of 60 Boeing
  • Today's key earnings reports: Alphabet, Microsoft, Amazon, Meta Platforms, AbbVie, Qualcomm, Automatic Data Processing, Canadian Pacific Kansas City, O'Reilly Automotive, Regeneron Pharmaceuticals, Canadian National Railway, Phillips 66, Aflac, Carvana, Allstate, Entergy, Ford Motor, Old Dominion Freight Line, Chipotle Mexican Grill…

Analyst Recommendations:

  • Armstrong World Industries, Inc.: Evercore ISI upgrades to outperform from in-line and reduces the target price from USD 203 to USD 200.
  • Boston Scientific Corporation: Daiwa Securities downgrades to neutral from outperform and reduces the target price from USD 83 to USD 60.
  • Crane Company: Stifel upgrades to buy from hold and raises the target price from USD 200 to USD 215.
  • Franklin Resources, Inc.: Barclays upgrades to equalweight from underweight and raises the target price from USD 26 to USD 31.
  • Sysco Corporation: Deutsche Bank downgrades to hold from buy and reduces the target price from USD 90 to USD 84.
  • T-Mobile Us, Inc.: Oppenheimer upgrades to outperform from market perform with a target price of USD 260.
  • Alexandria Real Estate Equities, Inc.: Cantor Fitzgerald maintains its neutral recommendation and reduces the target price from USD 60 to USD 43.
  • Bloom Energy Corporation: BTIG maintains its buy recommendation and raises the target price from USD 165 to USD 295.
  • Booking Holdings Inc.: JP Morgan maintains its overweight recommendation and reduces the target price from USD 5600 to USD 208.
  • Boston Scientific Corporation: Daiwa Securities downgrades to neutral from outperform and reduces the target price from USD 83 to USD 60.
  • Centene Corporation: Deutsche Bank maintains its hold recommendation and raises the target price from USD 39 to USD 53.
  • Corning Incorporated: Barclays maintains its equalweight recommendation and raises the target price from USD 100 to USD 149.
  • Elf Beauty: Jefferies maintains its buy recommendation and reduces the target price from USD 115 to USD 85.
  • Flex Ltd.: Baird maintains its outperform rating and raises the target price from USD 70 to USD 88.
  • Ge Vernova Inc.: Haitong International Research Ltd maintains its outperform rating and raises the target price from USD 814.48 to USD 1061.25.
  • Hims & Hers Health, Inc.: Jefferies maintains its hold recommendation and raises the target price from USD 16 to USD 25.50.
  • Landstar System, Inc.: Truist Securities maintains its hold recommendation and raises the target price from USD 145 to USD 190.
  • Nucor Corporation: Morgan Stanley maintains its equalwt recommendation and raises the target price from USD 180 to USD 227.
  • Nxp Semiconductors N.v.: Cantor Fitzgerald maintains its overweight recommendation and raises the target price from USD 280 to USD 340.
  • Sportradar Group Ag: BTIG maintains its buy recommendation and reduces the target price from USD 23 to USD 18.
  • Teradyne, Inc.: Cantor Fitzgerald maintains its overweight recommendation and raises the target price from USD 330 to USD 400.