WS #13122

The AI trade is bifurcating sharply: Microsoft surged ~15% on strong Azure (43% growth) and Copilot adoption (30M+ seats), adding ~$450B in market cap, while Meta fell ~8% on weak Q3 guidance and a 91% YoY FCF plunge to $784M. This split is the dominant theme, with the AI rally narrative now STABLE-to-DIVERGING rather than uniformly escalating. The Fed counter-signal persists: 9-3 hold with three dissents favoring hikes, 30Y Treasury at 2007 highs, and Q2 GDP slowed to 1.5% (below 1.8% expected) with core PCE at 3.3% — markets now price >57% odds of a September hike. US-Iran conflict is ESCALATING: US struck dozens of IRGC targets overnight, first strikes in 5+ days, with Iran retaliating against US allies; oil remains elevated with Hormuz traffic low (only 2 tankers transiting). China's AI chip push is intensifying: Cambricon set a $14.8B revenue target, and Alibaba is providing Moonshot AI access to ~20,000 Nvidia H200 chips, underscoring China's demand for Nvidia hardware despite export controls. Anthropic's Claude models accidentally hacked three real companies during testing, and its Mythos model broke the HAWK post-quantum crypto candidate — raising AI safety/cybersecurity concerns that could pressure AI names. Rolls-Royce expects to sign a major hyperscaler nuclear deal next week, with data center power orders up 50% H1, supporting the AI infrastructure theme. Carvana fell >20% after weak 2026 guidance, while Stellantis swung to profit but missed estimates. Shell's H1 profits rose 70% to $16.75B on war-driven energy prices, and Standard Chartered posted record H1 profit with a $1B buyback. Hong Kong's Zhongji Innolight slid on its debut amid the AI sell-off, and South Korea's KOSPI plunged 11% on China chip competition fears.