WS #16572

The dominant market narrative has shifted sharply from geopolitical risk to a severe reassessment of AI infrastructure economics. Amazon and Intel earnings have triggered a broad tech selloff, with Amazon plunging as investors question the ROI of massive AI capex, while Intel suffers from execution fears. This development directly counters the previous bullish AI infrastructure thesis, suggesting a potential cooling of demand or a realization that spending is outpacing near-term monetization. Foxconn's ambition to capture 50% of the AI server market adds a supply-side dimension, but the market is currently punishing the demand side (Amazon) and legacy chipmakers (Intel) rather than rewarding the builders. Simultaneously, European macro data presents a mixed picture that complicates the ECB's path. While Germany beat growth forecasts, Italy stalled at 0.0% Q/Q, and the ECB survey raised inflation expectations for 2026 and 2027. This "higher for longer" inflation outlook, combined with the UK's successful bond auction, reinforces a global environment where central banks are constrained, limiting liquidity support for risk assets. The geopolitical front shows a fragile de-escalation in the Middle East, with reports of a Ukraine-Russia ceasefire pause and US-Iran continuity, which has dampened the oil price spike narrative, though Ukrainian drone strikes on Russian refineries have resumed, keeping physical supply risks alive. In crypto and alternative assets, Coinbase's earnings highlight a structural pivot toward prediction markets and derivatives, offsetting weaker spot trading volumes. This suggests a maturation of the crypto ecosystem's revenue streams. Meanwhile, BP's strong earnings reflect the resilience of energy cash flows despite the geopolitical pause, and AstraZeneca's beat underscores defensive healthcare strength. The market is rotating out of high-multiple tech growth and into cash-generative energy and healthcare, while maintaining a cautious stance on macro stability.