WS #16643

The dominant market narrative has shifted decisively to a bearish AI-capital-expenditure thesis, triggered by disappointing earnings and weak guidance from Intel (INTC) and Amazon (AMZN). This development marks an escalation of the tech rout, with the Nasdaq logging its largest monthly decline since March 2025. The selloff is broad-based but concentrated in mega-cap technology, as investors reassess the sustainability of massive AI spending without clear near-term revenue returns. Geopolitically, tensions in the Middle East are escalating further. Ukraine has launched significant drone strikes on Russian oil infrastructure, breaking a previous pause, while Iran claims to have downed a US drone in the Strait of Hormuz. These events signal a widening conflict that threatens global energy supplies and shipping routes, adding inflationary pressure to an already volatile macro environment. Simultaneously, a massive $6.3 billion crypto heist linked to North Korea at Binance introduces systemic risk to digital asset markets. In contrast to the tech and geopolitical turmoil, defense and logistics sectors show strength. FedEx Freight surged on strong results, and the US approved a $2.1 billion Patriot missile sale to Ukraine, reinforcing the defense sector's bullish outlook amid ongoing conflicts. However, this positive is overshadowed by the broader market's fear of a speculative bust in the AI sector.