By Gemini (AI)
♦The market is waking up to two powerful, conflicting narratives.
On one hand, Taiwan Semiconductor (TSM) has delivered a blockbuster Q2 report, with profits surging 60% and, more importantly, a raised outlook for 2025. Shares are up ~4% pre-market. Their results, driven by massive demand for their 3nm chips used in AI and High-Performance Computing, provide a strong bullish indicator for the entire semiconductor and technology ecosystem. This reaffirms the AI investment thesis that continues to drive a significant portion of the market. GE Aerospace (GE) is echoing this positive sentiment, beating estimates and raising its multi-year guidance, sending its stock up over 4% as well.
Perhaps the biggest news this week is a significant policy pivot from the White House. Bloomberg is reporting that the administration has told Nvidia (NVDA) it could soon resume sales of its less advanced H20 AI chips to China. This marks a stunning reversal from the previously escalating tech tensions and the stalled UAE chip deal we noted earlier. The move is being interpreted as a potential overture for a larger trade deal with Beijing, a “Grand Bargain” that could dramatically de-escalate the tech war. This is a very fluid situation, but it’s a clear positive for the semiconductor sector and has broad market implications. This is $4.2 TRILLION if you are keeping score:
On the other hand, the market remains on edge due to political drama. While President Trump has denied immediate plans to fire Fed Chairman Powell, the story continues to inject uncertainty. This political maneuvering is a key factor we need to watch, as it can create significant intraday volatility.
Second Story: Tariff Threats Broaden, G20 Confronts Global Growth Hit
While the China tech story is a potential de-escalation, the broader tariff front is heating up. To clarify your question on the “10% or 15% for 150 Countries” story:
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This appears to be a new baseline tariff that would be applied on top of any existing duties for smaller countries that don’t have specific trade deals. The White House has previously referred to a “10% Baseline Reciprocal Tariff.“ So, this is an expansion of that policy.
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The key takeaway isn’t just the rate, but the uncertainty it creates. This is highlighted by the G-20 Finance Chiefs, who are now openly confronting the potential hit to global growth from this escalating trade war. The global economic community is clearly nervous.
This isn’t just speculation; it’s creating tangible drag and is now a central topic at the highest levels of global finance.
Key Market Movers & Themes
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Aviation Divergence (GE vs. UAL): The split in the aviation sector is a key story. GE Aerospace (GE) is flying high after raising its full-year guidance on a rebound in orders. Conversely, United Airlines (UAL), as Phil predicted yesterday, is dropping after a disappointing outlook, highlighting ongoing profitability and operational pressures in the airline industry.
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Russian Economy Under Strain: The exclusive report that Russian banks are discussing the need for bailouts is a “super-interesting” point, as Phil noted. It’s a strong signal that the war and sanctions are creating deep, systemic stress in their economy, a situation worth monitoring for any potential contagion risk, however small.
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Trump/Powell Drama: As Phil and Boaty rightly pointed out yesterday in the Live Member Chat Room, the noise around the Fed chair is mostly speculation and headline risk for now. We’ll keep it on the radar as a source of potential volatility but won’t treat it as a core market driver at this stage.
The potential for a major US-China deal on one hand, contrasted with broad-based tariff uncertainty and specific signs of economic strain in Russia on the other, creates a complex but fascinating landscape for our members this morning.
Key Earnings Movers
Beyond the headlines, several other key earnings reports are moving stocks this morning:
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The Good:
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Novartis (NVS): Beating estimates, raising its outlook, and announcing a new $10 billion share buyback. A strong signal from a major pharmaceutical player.
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PepsiCo (PEP): Posted a solid beat driven by strong international results. The stock is trading higher, showing resilience in the consumer staples sector.
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The Travelers Companies (TRV): Reported a significant earnings beat with a Non-GAAP EPS of $6.51, smashing the estimate of $2.90.
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The Bad:
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Elevance Health (ELV): Cut its full-year earnings outlook, citing elevated costs. The stock is down and is dragging peers like Centene (CNC) and Molina (MOH) lower with it, signaling pressure in the health insurance sector.
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United Airlines (UAL): Shares are down after its report. While the EPS beat, a revenue miss and narrower margins, blamed on disruptions at Newark, are weighing on the stock. Their outlook for the rest of the year reflects this continued pressure.
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Macro and Sector-Specific News to Watch
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Auto Sector Under Pressure: JPMorgan issued a sweeping note that included downgrades for several auto retailers like Sonic (SAH) and Asbury Automotive (ABG), warning of a negative risk-reward profile for the sector as fundamentals weaken. Adding to this, Volvo (VLVOF) is reportedly cutting its U.S. model lineup in response to tariffs, a tangible impact of the ongoing trade disputes.
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US-China Tech Tensions Simmer: A major deal that would allow the UAE to purchase billions in Nvidia (NVDA) AI chips is reportedly being held up over national security concerns related to China. This is a crucial development in the global tech supply chain story. In a related vein, China has vowed to curb what it calls “irrational” price wars in its domestic EV market, a move that will affect players like NIO (NIO), XPeng (XPEV), and Li Auto (LI).
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A Biotech Eruption: Sarepta Therapeutics (SRPT) is the biggest mover this morning, surging over 30% after announcing a major restructuring, including a 36% workforce reduction, to refocus its pipeline and cut costs.
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Phil again:
That’s great! I’m using the Gemini that’s embedded in the top right corner of Chrome (with the ♦ icon) as it’s able to see the screen so, while I’m reading. We (the Boyz and I) do a little modification to improve his comprehension and output and he (Gemini) and I then read and discuss the news and he puts it together as a report. I strongly suggest trying this for whatever work you do – this is a fantastic way to improve productivity without throwing away the human (yet).
I get some complaints that I let AIs and AGIs do the writing but, frankly, I’m being HONEST while SO MANY WRITERS AND ANALYSTS (more than half) are secretly using AI to do their jobs now (it’s very obvious to me and the Boyz). People don’t seem to want to admit they use AI to do their jobs but that is like pretending you don’t have a word processor or a calculator – isn’t it?
My job is to make you a better trader and you won’t be a better trader in 2030 if you don’t start learning to work with AIs NOW! You will have to put in your 10,000 hours and, like a calculator – an AI should be a tool you reach for whenever you have some thinking to do…
So I will continue to use AIs and AGIs but I will also continue to tell you exactly what I am using and how I am using it so you too will be able to practice right along with me and soon we will be embedding Warren and Boaty into the PSW Member Chat Room, where you’ll be able to use our powerful models to do your own research any time you want to.
What a moment in history we are living in – this is like the electric light bulb (1880s) or the PC revolution (1980s) or the Internet (1990s) and now it’s 35 years later and we’re making the next great leap forward – don’t get left behind!
