Michael Jensen @GenesisGains: "Hello everyone, The past week has..."

Denmark

Hello everyone, The past week has been a reminder that markets can move much faster than most investors expect. Just days after reaching fresh highs, the $NSDQ100 dropped from 30,755 to a low of 28,185 before recovering to around 28,720. The $SPX500 followed a similar path, falling from 7,620 to 7,237 before rebounding toward 7,323. A 5–10% pullback is not unusual. What stands out is the speed. We witnessed some of the largest point declines and intraday reversals in Nasdaq history, suggesting that investors are beginning to question whether the AI trade can continue to justify ever-higher valuations without equally impressive earnings and cash flows. The biggest development is what happened beneath the surface. Last week's selloff was largely concentrated in the AI complex rather than the broader market. While headline indices fell sharply, many sectors held up far better than expected. Market breadth has quietly improved, with equal-weighted indices outperforming their market-cap-weighted counterparts. That often signals a rotation rather than a broad market collapse. The reason investors are becoming more cautious is simple: the cost of the AI race continues to rise. Several major AI-related companies are raising capital or issuing debt to fund massive infrastructure spending. Data centers, power requirements, networking equipment, and advanced chips require enormous investment, and markets are starting to ask the obvious question: When do these investments begin generating meaningful returns? Recent reports of delayed data-center projects and financing challenges around some AI initiatives have only added to those concerns. This does not mean the AI story is over. Far from it. But it does suggest that markets may be transitioning from a phase of unlimited enthusiasm to one where execution, profitability, and return on investment matter far more. At the same time, geopolitical risks remain elevated. The situation involving Iran and U.S. military assets continues to create uncertainty, while the Strait of Hormuz remains a key focus for energy markets. Despite ongoing tensions, oil prices have remained surprisingly restrained, a disconnect that investors should continue monitoring. Inflation is also back in focus. Recent producer-price data from several major economies points to persistent cost pressures, and markets are increasingly debating whether central banks may have less room to cut rates than previously expected. That brings us to the key question: Can markets continue pushing higher if AI leadership weakens while interest-rate expectations become less supportive? Before we even get to earnings season, however, markets face another major test: today's CPI report at 14:30 CET. A softer-than-expected reading would likely revive hopes for lower interest rates and provide support for growth stocks, particularly in the technology sector. A hotter-than-expected number could reinforce concerns that rates may stay higher for longer, putting additional pressure on the market's most richly valued companies. In other words, today's CPI report may determine the market's direction over the coming days, while earnings season will determine its direction over the coming months. The upcoming earnings season will be critical for companies such as $NVDA (NVIDIA Corporation), Microsoft, $MU (Micron Technology, Inc.), $MRVL (Marvell Technology Group Ltd), Palo Alto Networks, and Super Micro. Investors will be looking beyond revenue growth and focusing much more closely on margins, spending levels, and whether massive AI investments are translating into sustainable profits. What I'm Watching 📌 Market breadth versus mega-cap AI leadership 📌 AI infrastructure spending and capital raises 📌 Inflation data and interest-rate expectations 📌 Developments in the Middle East and energy markets 📌 Earnings guidance from key AI, semiconductor, and software companies The bulls can point to the rebound from yesterday's lows. The bears can point to the fact that both major indices remain well below the record highs reached only a week ago. The next few hours may belong to CPI. The next few months will belong to earnings. Or as Wall Street occasionally discovers: Building the future is expensive. Eventually, someone has to pay the bill. But first, the market wants to know what inflation is charging for it.

Not investment advice. The author may have financial interests in the mentioned instruments.