Semis soar on Nvidia's $150bn; treasuries crushed.

Transcript

Tom Buddy, you could power a small country with the amount of money Nvidia is throwing at Taiwan. And yet, Treasury bonds are getting absolutely crushed. Welcome to a market that's pricing paradise and panic at the same time.

Marie It's Wednesday, May twenty-seventh, twenty twenty-six, New York Edition. I'm Marie, and we've got Tom and Gerald here. The takeaway: semis soar on Nvidia's hundred-fifty billion dollar commitment, while treasuries get hammered. Let's get into it.

Gerald Before we dive into Nvidia's spending spree, Tom, that buy call on Sociedad Quimica yesterday — SQM beat earnings and boosted its lithium forecast. Up another four percent last session? That's a nice start.

Tom Gerald, don't get too excited — it's a lithium play, not a bond trade. But yeah, SQM's looking solid. And hey, remember we said buy copper and gold too? Both holding up nicely.

Tom Okay, the Nvidia number. A hundred and fifty billion dollars a year on Taiwanese AI suppliers. Jensen Huang is not messing around. Nvidia's forward P-E is seventeen — that's cheap for this kind of growth. I'm buying more.

Gerald Tom, it's seventeen times next year's earnings if they hit the numbers, but at nine percent below its high, the market's asking whether that spending translates to margins. Look mate, when a company outspends the GDP of some countries, I get a little itchy.

Tom Gerald — Gerald, this is foundational. AI demand is insatiable. TSMC is up twenty-nine percent year to date and at an all-time high. AMD is up one hundred twenty-five percent. The semiconductor ETF SMH is at an all-time high. The signal is screaming: this cycle has legs.

Marie Hold on — but the SMH at an all-time high also means all the good news is priced in. If there's even a hiccup in Nvidia's supply chain, these crowded longs could unwind fast. Tom, you saw what happened to semis in Q2 last year.

Tom Alright, fair point — but this time it's different, Marie. The capex is real. The optical supply chain is buckling under the strain. Lumentum down three point eight percent last session but still up one thirty-five year to date. The shortages are a tailwind for specialized players like Coherent, up near its high.

Gerald Yeah look, the optical angle is interesting. When lasers and fiber optics are getting squeezed, it's not just Nvidia — the whole AI buildout is stretching every supplier. Lumentum and Coherent are logical plays.

Marie For sure —

Tom Totally.

Gerald It's the real deal.

Marie Exactly. And that's the convergence — multiple publishers all pointing to the same supply-demand imbalance. It's hard to bet against that momentum.

Tom And while we're on momentum, China's industrial profits jumped twenty-four point seven percent in April, fastest in over two years. I know the bears have been piling on, but this data says the cyclical recovery is real.

Gerald Tom, profits are one thing, but the China large-cap ETF, FXI, is down ten percent year to date and near its fifty-two-week low. The market clearly doesn't believe this growth reaches consumers. You're buying a value trap, buddy.

Marie I'm going to push back here — that disconnect is exactly the opportunity. If the data broadens, these beaten-down China ETFs could re-rate hard. MSCI China is down about ten percent too. It's a contrarian bet with a catalyst.

Gerald Fair, but I'd rather wait for the consumer to show up. Industrial profits don't pay my bills.

Tom Ha — just like bonds don't pay yours, Gerald. Oh wait.

Gerald Alright, alright. We'll get to the bond carnage in a minute. But first, Hong Kong.

Gerald Hong Kong overtook Switzerland as the world's biggest offshore wealth hub — two point nine five trillion under management. FT and SCMP both ran it. That's a structural shift, mainland capital pouring in.

Marie It's a staggering number, but I wonder about sustainability. Capital controls and geopolitics could reverse that flow in a heartbeat. The Hong Kong ETF, EWH, is up six point seven percent year to date, but I'm watching the regulatory environment.

Tom Marie, if you're worried about geopolitics, you won't buy anything. The trend is clear: Asia's wealth is staying in Asia. Hong Kong financials and asset managers are the winners. EWH has room to run, five percent below its high.

Gerald To be fair, the story checks out. The I P O market there is booming, and the wealth is sticky once it's in. I'd put a small position in EWH.

Gerald Speaking of structural, the UK retailers are pushing for a two-sixty charge on small parcels to close a customs loophole against Chinese e-commerce. M&S, Primark, Next — they're saying it levels the playing field.

Marie It's about time. The loophole is blatantly unfair, and if it closes, domestic retailers get a direct boost. Marks and Spencer up three point nine percent last week, forward P-E just above ten. That's value, Gerald.

Gerald Yeah, M&S at ten times earnings with a potential policy win? That's my kind of play. And Primark owner AB Foods is down thirteen percent year to date — could be a nice recovery if this goes through.

Tom Wait, wait — M&S? I thought we were talking about chips. Gerald, you're going to have me buying socks next.

Gerald Diversification, Tom. And speaking of socks, how about GLP-1 drugs saving the mall? FT Alphaville's most original take today.

Tom Ha — fair enough.

Marie I love this thesis — users lose weight, buy new clothes, and mall traffic surges. It's speculative, but it links pharma and retail in a way I haven't seen before. Eli Lilly up four percent last week, still six percent below its high.

Tom For real? So the mall's savior is a diabetes drug? That's the best narrative I've heard all month. Novo Nordisk is down fifteen percent year to date — if this diet-driven shopping catches on, that's a huge recovery play.

Gerald Look, I'll keep it real — I'm not buying retail on a weight-loss hypothesis. But I'll happily ride Lilly and Novo for the actual drug sales. Lilly's forward P-E of twenty-four is rich but justified if GLP-1 demand accelerates.

Marie No but that's exactly the point — the consumer impact could be an unexpected second derivative. It's the kind of structural shift we were talking about. I'd buy Lilly and hold the retail ETF until we see data.

Tom Alright, back to a trade that's actually working: lithium. SQM boosted guidance on battery storage demand. The storage angle is new — beyond EVs. Lithium ETF is up thirty percent year to date. And Albemarle, still twenty-one percent below its high, is catching up.

Gerald Yeah, SQM's forward P-E of fourteen is reasonable, and the storage thesis gives it a second leg. I'm not selling my SQM from yesterday.

Marie Wait, Gerald, you agreeing with Tom on something? I need to mark my calendar.

Tom Ha — even Gerald can't fight a profit beat. But seriously, the lithium trade is a direct play on the energy transition plus this new storage demand. It's a clean barbell with AI.

Gerald Alright, let's address the elephant in the room: the bond market rout. TLT, the long-term Treasury ETF, down two point two percent year to date, only three percent above its fifty-two-week low. Iran war fears, inflation, new Fed chair Kevin Warsh — yields are screaming higher.

Tom But Gerald, TLT is at a point where it's pricing in a lot of bad news. I know you love shorting duration, but if the Fed under Warsh surprises with a pause, those shorts get torched.

Marie Hold on — to be fair, nobody knows Warsh's reaction function. That uncertainty is why TIPS are the smart play. Inflation-protected bonds flat year to date but they'll hold up if inflation keeps biting.

Gerald Exactly! Short the intermediate-term Treasury ETF, IEF, and TLT, but buy TIP. That's the barbell we're talking about: long AI, short duration, long inflation protection. It's the cleanest expression of this market split.

Tom Alright — fair. I still think long bonds at these yields are tempting, but the momentum is against you. I'll hold my nose and play the short end.

Marie TIPS — it's a must.

Gerald Totally.

Tom Yeah, can't argue.

Gerald Moving East, Japan is starting trade talks with Mercosur — Brazil, Argentina, et cetera — seeking oil and car exports. And separately, the Quad is coordinating on critical minerals and rare earths. Japan ETFs are near highs, up fourteen percent year to date.

Marie The Quad minerals initiative is a direct counter to China's dominance. The rare earth ETF, REMX, is up twenty-nine percent year to date. It's a structural long.

Tom And Toyota — down twelve percent year to date, forward P-E twelve — a Mercosur deal could open a huge market. But wait, Gerald, you're going to tell me about the aluminum squeeze hurting them.

Gerald Ha — yeah, you're learning. The aluminum squeeze is squeezing Japanese carmakers. Toyota and Honda are getting hit by high input costs. I'd short Toyota and buy Alcoa. Alcoa up thirty-two percent year to date and still near its high.

Tom So you're long Alcoa and short Toyota? That's a pairs trade I can get behind.

Gerald Exactly. Aluminum demand is surging, and Alcoa is the pure play. But the carmakers' margins are getting crushed.

Marie No argument here. But I'd be careful with Brazil equities — the trade talks are early, and local industry might face competition. Hold the Brazil ETF, EWZ, for now.

Tom Quick one on defense: the founder of CSG NV, that massive defense I P O, is building a new group seeking two hundred million euros. The defense ETF PPA is up eight percent year to date. Sector appetite is real.

Gerald I'd hold CSG itself, though — down forty-three percent year to date. The founder's new venture validates the model, but it might distract management.

Marie So let's pull this together. Today's signals show a market split in two: AI abundance and macro scarcity. Our view is a barbell — long the semiconductor ETF SMH or Nvidia and TSMC, long TIPS, short TLT. It leans into the regime split.

Tom But the bear case, as Gerald keeps hinting, is positioning. SMH at its high, AMD at its peak — any execution miss, and the unwind is brutal.

Gerald And the bond trade is equally crowded. TLT near its low, if yields reverse, shorts get squeezed. The cross-asset unwind, if it comes, won't be gentle.

Marie Right — and conspicuously absent: anyone modelling Warsh's Fed. That's the wildcard. So the barbell isn't just a bet, it's insurance.

Tom As always, none of this is investment advice. Do your own research, talk to an advisor before making moves.

Gerald And if you're just finding us, hit follow on Spotify — or check investmentflash.com for the full digest with charts and sources.

Marie We're back at seven-thirty a.m. London time tomorrow. See you then, and until next time, stay sharp.