Summary of Key Points
Last week, Brent crude oil prices briefly exceeded $100, putting pressure on U.S. stocks (with the Nasdaq falling by 2%), but the CSI 300 and Hang Seng Indexes rose against the trend, demonstrating the resilience of Greater China assets. Geopolitically, there was a temporary ceasefire between the United States and Iran; however, the risks associated with disruptions to the Hormuz Strait and the Red Sea shipping lanes continue to drive market volatility. The Federal Reserve is unlikely to raise interest rates in July but retains the option for September, while a potential earlier rate hike by the Bank of Japan could pose a more direct liquidity risk. There is strong demand in the AI industry, but markets are now focusing on financial quality. This week, the earnings reports from Microsoft and other giants will be crucial.
1. Temporary Ceasefire between the US and Iran, but the Threats to Energy Routes Remain: Why did the two sides suddenly stop attacking each other? Simply put, neither wants to escalate the situation: Trump needs to win the mid-term elections, and high oil prices and war expenses could cost him votes; Iran also doesn't want a full-scale war and is using limited attacks on ships as leverage for negotiations (such as the lifting of sanctions). A full-scale war is unlikely for now, but the dispute revolves around control of the Hormuz Strait. The possible outcome is that, under Omani mediation, the southern route (near Oman) will be reopened to free traffic, with the U.S. maintaining escort services; the northern route (near Iran) may be managed by Iran (with reporting requirements).
The real risk lies in both routes being blocked simultaneously. If Houthi militants cause problems in the Red Sea as well, it would lead to a global energy transport crisis and further price fluctuations. This is why Greater China assets were relatively less affected by the negative news—our dependence on Middle Eastern energy is not as high, and we have strong policy support.
2. The Fed's Decision on Interest Rates in July: Rising oil prices increased the likelihood of a Fed rate hike in July to 35%, but core inflation (excluding energy and food) has cooled down, and employment growth has slowed, which does not justify an immediate hike. There is significant disagreement within the Fed: some believe that rising energy costs could spread to other commodities, necessitating an earlier rate increase; others argue against it. Therefore, the Fed may hold off in July but keep the option open for September (like holding a trump card).
3. The Bank of Japan's Potential Move: A potential earlier rate hike by the Bank of Japan from December to October could cause the yen to appreciate. Investors using low-interest yen to buy high-yield assets would need to sell them quickly, leading to chaotic global capital flows, which could have a more direct impact than a Fed rate hike.
4. Strong AI Demand, but Profitability is a Concern: Google's earnings show that the AI industry is not just about spending money. Google Cloud revenue increased by 82%, with orders totaling $514 billion (indicating strong demand for AI capabilities), and search advertising revenue also rose by 17% (challenging the notion that generative AI will replace traditional search). Google has raised its annual capital expenditure to $195-205 billion (to continue investing in GPUs and data centers), suggesting that demand for AI infrastructure is still growing. However, Google's stock price has fallen due to negative cash flow (earnings not covering expenses). Markets are now more interested in whether companies can turn profits on their investments. This week's earnings reports from Microsoft (Azure cloud), Amazon (AWS cloud), and Meta (advertising + AI) will be crucial: if they can show growth in revenue, orders, and cash flow, the market will be more optimistic about AI; otherwise, only upstream suppliers (such as chip and server manufacturers) will benefit, while cloud companies' valuations may be pressured.
5. The Storage Industry is Booming: The storage industry as a whole is still profitable, but there are differences within it. HBM (high-performance memory essential for AI servers) and server DRAM (for regular servers) are in high demand due to the surge in AI server sales, leading to doubled memory capacity per machine and insufficient HBM production. NAND (used in smartphones/computers) prices may peak soon (with increased supply from companies like Yangtze Memory), but growing shipments can offset price declines to some extent.
The listing of ChangXin Technology this week is a significant event. As a leading domestic storage chip company, its listing will draw more attention to the autonomy and control of semiconductor equipment and materials (such as etching machines and photoresists used in storage production). These sectors could see increased demand.
Final Reminder
This article is not investment advice; markets are risky, so please proceed with caution when investing!
(The entire text uses plain language to make it accessible to non-financial professionals.)