Risk appetite ignores the Fed; AI and M&A lead.

Transcript

Tom Thirty-three percent in one session, and the market is still finding new ways to get bullish—even with a Fed official talking rate hikes. You're listening to Investment Flash.

Marie Weekend Edition, May 30th. I'm Marie.

Gerald I'm Gerald.

Tom And I'm Tom. The digest that cuts through the weekend noise.

Tom Okay, let's start with the obvious. Dell. Up thirty-three percent last session. I mean, we said buy Dell in yesterday's New York Edition—if you pulled the trigger, buddy, you are laughing right now.

Gerald Right, but Tom, the stock's now just two percent off its all-time high. Most of that immediate move is priced. Where's the remaining upside without a new catalyst?

Marie No but Gerald, that's exactly where the sympathy plays come in. Super Micro joined the rally but is still twenty-six percent below its fifty-two-week high. If the AI server buildout is real, that's where the recovery room is.

Tom Exactly!

Marie Totally.

Gerald Fair enough.

Tom And Hewlett Packard Enterprise, up thirteen percent, near its high, but still benefiting. The AI infrastructure spending is accelerating—old-school hardware names are suddenly growth plays.

Gerald Old-school hardware as growth. I've heard that one before. But to be fair, the earnings were blowout. It's just that buying after a thirty-three percent gap up gives me a nosebleed.

Marie Ha—Gerald, your nosebleeds are our risk management signal. But seriously, if you want a cleaner entry, Super Micro's discount is the way.

Tom Alright, from servers to the skies. Gerald, take EasyJet.

Gerald Yeah, so EasyJet. Private credit firm Castlelake sniffing around, reported by both Bloomberg and the Financial Times. Stock's up eight percent this week on the rumor. But it's still thirty-three percent below its fifty-two-week high. There's a potential bid premium if this goes formal.

Marie And it's another UK-listed company potentially getting taken out. The London market keeps shrinking. But the key is, the premium isn't fully priced—you're buying a discount to intrinsic value with a catalyst.

Tom I love an mergers and acquisitions play. The risk-reward at these levels is compelling. And we haven't even talked about the summer travel demand.

Gerald Travel demand's good, but the airline business is still a tough one. Fuel costs, labor. The takeover premium is the main thesis here, not earnings. So if the deal falls through, you're left holding a cyclical.

Marie Wait—that's the point, Gerald. You're buying it cheap enough that the downside is limited. Thirty-three percent below high, on a takeover rumor. The risk is asymmetric to the upside.

Gerald Alright, fair enough. I'll grant the asymmetry.

Tom Now, the most original take today. Marie, you flagged it—memory chips more valuable than oil.

Marie The Wall Street Journal argues AI data centers are making memory chips the new oil—indispensable, with long-term contracts smoothing out cycles. Micron, Samsung, SK Hynix—these are the new commodity kings.

Tom For real? Micron at nine times forward earnings? We said buy it yesterday, and it's up five percent. I'm already in, but this thesis says there's way more runway.

Gerald Hold on—more valuable than oil is a huge claim. Memory is still fundamentally cyclical. We've seen booms and busts. These long-term contracts might just be a fad if demand softens.

Marie But Gerald, that's exactly the shift the article points out. If contracts lock in supply and pricing, the sector's multiple re-rates from commodity cyclicals to something more stable. That compression from nine times earnings—that's the bet.

Tom And it's not just Micron. The whole memory complex benefits. This is an AI buildout play that isn't priced into the low multiples. I'm bullish.

Gerald I mean, the Journal making the call does give it weight. But I'll be watching those contract details. If it's truly sticky, maybe I'll bite.

Marie Look at Gerald, almost coming around. But don't forget the aluminum premium story—another commodity getting squeezed.

Tom Right, Bloomberg says Rio Tinto and South32 offered record Q3 premiums to Japanese buyers. Middle East conflict tightening supply. Aluminum prices are going up.

Gerald Rio Tinto's stock is thirteen percent below its high, twelve point seven times forward earnings. Not screaming value, but decent for a producer. I'd rather the aluminum ETF, though—eighteen percent below its high, more direct commodity exposure.

Marie The ETF is a cleaner play on the aluminum price, but Rio gives you diversification. Either way, the supply squeeze is real. War premium is back.

Tom And commodities in general are undervalued. We had oil yesterday, now aluminum. The whole space is waking up.

Gerald Waking up? Or just getting a temporary war spike? I'm cautious on chasing commodity rallies built on conflict premiums. They can vanish fast.

Marie But that's the nature of supply shocks, Gerald. You ride them. The record premiums are here now, and they'll show up in earnings. Rio and South32 will benefit.

Tom Now, let's pivot to software. ServiceNow up fourteen percent last session, capping a forty percent May rally. AI fears fading across enterprise software.

Marie MarketWatch calls it a historic month for the sector. Even with the run, ServiceNow is still forty-one percent below its fifty-two-week high. That's the thing—software was beaten down so hard that this rally barely dents the drawdown.

Gerald So it's a relief rally in a still-expensive sector? I'll take the cheap ones. Salesforce at twelve times earnings, Adobe under ten. Those are my kind of software bets.

Tom But Gerald, ServiceNow is a pure AI play. It's not just a value trade—it's growth re-accelerating. The AI fears are fading because companies realize they need ServiceNow's platform to manage AI workflows.

Marie I'm with Tom on ServiceNow's quality, but I see Gerald's point on valuations. Salesforce and Adobe offer margin of safety. The whole group is rallying on sentiment, not fundamentals yet.

Tom The sentiment shift is the catalyst! Once everyone stops thinking AI will destroy software companies, the multiples re-rate. I'm buying the leaders, not the laggards.

Gerald Ah, buying the rip. A classic Tom move.

Tom Tom moves have been working lately, buddy.

Marie Alright, enough. Let's talk about the elephant—the Fed. Chicago Fed chief saying a rate hike is still on the table if inflation persists. That's a direct threat to long-duration assets.

Gerald Exactly. The long-term Treasury ETF and the intermediate Treasury ETF are flat, but if the market reprices for a hike, those bonds drop hard. Shorting the intermediate or buying puts on the long-term Treasury ETF is a cheap hedge right now.

Tom But Marie, the equity market doesn't care. The S&P 500 just notched a nine-week winning streak. Risk appetite is completely ignoring the Fed.

Marie That's the danger, Tom! The market is underpricing hawkish risk. The crypto divergence proves it—bitcoin and ether are drifting while stocks rally. Risk appetite isn't uniform. If the next C P I is hot, this AI narrative alone won't protect the broad market.

Gerald I'm with Marie. The dollar isn't even strengthening on this, which tells me the market is asleep. I'd rather fade duration and be early than late.

Tom Or maybe the dollar is just stuck. But fine, I'll take the barbell—own the AI hardware, but hedge with some bond protection.

Marie That's exactly our view. The barbell: long Dell, Micron, the AI winners, and buy some long-term Treasury puts or short the intermediate Treasury ETF. The cleanest expression of today's mood.

Tom That's the barbell.

Marie Exactly.

Gerald Spot on.

Gerald A barbell that actually makes sense. I'm shocked.

Tom Even Gerald's on board. That's how you know it's a good call.

Marie And on crypto, the divergence is a warning. Only Hyperliquid's HYPE token is rallying—everything else is drifting. We're not saying it's over, but the momentum is waning.

Tom So sell bitcoin and ether? I think that's overstating it. But yeah, if you're looking for relative strength, Hyperliquid is the only one with a pulse.

Gerald Crypto lags equities often precede broader risk-off moves. I'd say it's a yellow flag, not a sell signal. Just be aware.

Marie And finally, the ag trade. 'Godzilla' El Nino threatening crops. Wheat and corn could spike. The wheat ETF is down five percent this week—that's a buy the dip before the damage shows up in prices.

Tom Love a weather catalyst. I'd buy the wheat ETF and the corn ETF direct. Simple, asymmetric.

Gerald Weather trades are the ultimate guesswork. You could be right for months and still lose money waiting. I'd rather the agribusiness ETF—diversified, less dependent on a single crop panic.

Marie Understood. But the risk is there, and it's not priced. That's all we're saying.

Tom So the takeaway: risk appetite is ignoring the Fed, led by AI and mergers and acquisitions. Dell, EasyJet, Micron—the market wants to put money to work. But don't forget the hedge.

Gerald As always, none of this is investment advice.

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

Tom We're back tomorrow, Weekend Edition at ten a.m. London time. See you then.