AI Is Winning. Oil Still Gets a Vote.
GOOD MORNING, Wall Street enters the new week with two very different stories running at the same time. Intel just surged more than 24% after AI-driven CPU demand helped push its shares above their dot-com-era peak, reinforcing the idea that inference is broadening the semiconductor boom beyond GPUs. But the weekend brought little progress on Iran: U.S. envoys did not travel to Islamabad, Hormuz traffic remained near a standstill and Tehran kept demanding an end to the U.S. blockade before broader talks. Five megacap tech companies report this week, the Fed meets Wednesday and PCE lands Thursday. AI momentum is strong. Oil still gets a vote on how much investors are willing to pay for it. MARKETS | TLDR
AI INFERENCEIntel Just Put CPUs Back Into the AI TradeIntel shares surged more than 24% Friday after the company reported unexpectedly strong demand for CPUs used by AI service providers. The demand was strong enough that Intel sold chips it had previously written off, helping first-quarter results and supporting a better-than-expected sales outlook. AMD and Arm rallied alongside it as investors reconsidered the role of general-purpose processors in an AI market that has been dominated by GPUs. That matters because AI inference has different economics from training. Training frontier models is heavily GPU-intensive, but serving millions of user requests can require a broader mix of compute optimized around latency, cost and power efficiency. If CPUs capture more of that workload, the AI hardware cycle broadens beyond Nvidia and creates new revenue pools for companies investors had largely treated as second-tier beneficiaries. The caveat is sustainability. Some of Intel's Q1 upside came from selling older inventory that had already been written down, and CFO David Zinsner warned that benefit would not repeat in the next quarter. The market reaction therefore says as much about expectations as fundamentals. Intel proved inference demand is strong enough to change the narrative; now it has to show that the demand persists after the accounting tailwind fades. WEEKEND MACROHormuz Is Still the Market's Inflation SwitchWeekend diplomacy failed to produce a clear breakthrough. President Trump cancelled a planned trip to Islamabad by envoys Steve Witkoff and Jared Kushner after saying Iran had offered "a lot, but not enough," while Iranian officials continued to demand that the U.S. blockade be lifted before normal negotiations resume. Traffic through the Strait of Hormuz remained near a complete halt. That matters because the market entered the weekend hoping Friday's diplomatic signals would turn into actual physical relief. Instead, the key bottleneck stayed in place. Before the war, roughly one-fifth of global oil supply passed through the strait. When that flow is constrained, higher crude prices feed directly into gasoline, shipping and input costs — exactly the inflation channels that make the Fed less willing to cut rates. The timing could not be more important. The Fed meets Wednesday, March PCE arrives Thursday and five Magnificent Seven companies report during the week. If oil stays above $100, stronger AI earnings will have to compete with a higher inflation and discount-rate backdrop. A peace headline can move markets for a day. What matters for the policy path is whether tankers actually start moving. HEADLINES
UPCOMING
DEEP INSIGTHSIntel's AI Inference SurpriseRead this for a useful expansion of the AI hardware story beyond GPUs. Intel's quarter suggests inference workloads are reviving demand for CPUs, but it also highlights the difference between durable end-market strength and one-off benefits from previously written-down inventory. Wall Street's AI + Fed Test WeekThis is the best map of the coming week. It connects record-level equities, strong earnings breadth, hyperscaler AI capex and the Fed's response to war-driven inflation — the four variables most likely to determine whether the April rally can keep extending. |