What’s Next for the AI Play?

Despite momentary optimism, driven by Micron’s strong quarterly results, the majority of semiconductor companies and nearly all hyperscalers closed the week in decline.

🌏 Asia We begin the new week with a sell-off in SK Hynix (-4.4%) and Samsung (-5.7%) shares; these companies account for approximately half of the KOSPI index’s capitalisation (-0.9%). Japan’s NIKKEI 225 (-1%) is also in the red, dragged down by poor performance from giant Kioxia (-9.4%), the largest company on the Japanese stock exchange, a manufacturer of flash memory and solid-state drives. Conversely, China’s Hang Seng (+2.6%) is in positive territory, supported by healthcare stocks benefiting from capital rotation. Gains were recorded by:

• CSPC Pharmaceutical Group (+10%) – producer of innovative drugs (e.g., for cardiovascular or oncological diseases) and generics.
• Innovent Biologics (+7.9%) – producer of advanced biological drugs, primarily modern anti-cancer and immunological therapies.
• JD Health International (+6.9%) – China’s largest online pharmaceutical platform, connecting an e-pharmacy with telemedicine services and medical consultations.
• Sino Biopharmaceutical (+6.8%) – a large, diversified medical conglomerate covering the full supply chain, from advanced R&D to drug distribution.

🌍 Geopolitics Weekend headlines remained dominated by issues surrounding the US-Iran conflict. On Sunday, President Trump accused Iran of violating the framework agreement, striking Iranian missile depots, drones, and radar points around the Strait of Hormuz. Tehran fired missiles and drones at the Ali Al Salem base in Kuwait and the Fifth Fleet base in Bahrain, while threatening to halt negotiations entirely. However, both sides are scheduled to return to negotiations on Tuesday, supporting a modest improvement in sentiment and a 0.7% rise in S&P 500 futures.

🛢️ Commodities Crude oil prices remain at their lowest level since the outbreak of the war.

• Brent crude oil is currently priced at approximately $72 per barrel.
• WTI is slightly below $70.

Gas prices are also trending downwards:

• NATGAS is hovering around $3.29 per MMBtu.
• TTF MWh is priced at just over $41.

Precious metal prices remain at levels close to their recent lows.

• The price of a troy ounce of gold is currently just under $4060, and silver is at $59. This represents a decline of 25% and 50%, respectively, relative to the local peaks reached just a few months ago.

📈 Macroeconomic Data Japan Retail sales for May exceeded expectations, accelerating to a level unseen since November 2023. Strengthening domestic consumption, in the face of persistent high price pressure and a weakening yen, could be a significant argument for further monetary policy tightening by the Bank of Japan. However, a rate hike before the end of the year is not yet fully priced in (approximately 87% market-implied probability), and the USDJPY pair appears to be steadily moving towards the 162 level.