AI bull returns; oil holds war bid; financials hit records.

Transcript

Tom AI's back, oil's bid, and Wall Street just printed a record quarter — busy morning in London, let's get into it.

Marie Good morning and welcome to Investment Flash, London Edition, Thursday July 16th. I'm Marie, joined by Tom and Gerald. Buckle up, because last session's moves are setting off alarm bells and victory laps simultaneously.

Tom UBS's theme-o-meter is calling it: the AI bull market is back. NVDA at 32 times trailing earnings, 10 percent below its high — that's a green light for earnings season to prove the doubters wrong, buddy.

Gerald A green light, Tom? IBM just plunged 28.5 percent in a week. The FT says that's a warning to the entire IT sector — legacy spend is getting crowded out. So maybe not all AI is created equal.

Marie Right, but that's exactly the trade, Gerald. Sell IBM, buy Microsoft and NVIDIA. MSFT up 2.8 percent last session, forward P-E 20.4, and it's the cloud provider that benefits from this AI shift. You don't want to be on the wrong side of that.

Tom Exactly. NVDA is the pickaxe seller. Up 12.5 percent year to date, and if earnings come through, that forward P-E of 16.6 is hardly stretched. I'm buying.

Gerald Forward P-Es are forward-looking, Tom. But fair enough — IBM's fifty-two-week low says the market is voting with its feet. I'll just say: the theme-o-meter sounds like a gadget from a 1980s sci-fi, not investment research.

Marie Ha — only Gerald would call a UBS model a sci-fi prop. But look, the convergence here is clear: AI infrastructure spend is accelerating, and legacy IT is the loser. That's a pair trade even a value guy might like.

Tom Exactly — pair NVDA against IBM. What could go wrong?

Gerald You said that about Cisco in 2000.

Tom Oh come on.

Marie Alright, moving on — but the signal stands: AI is back, and it's selective.

Marie Morgan Stanley just posted record revenue, equities trading surged 69 percent to 6.3 billion dollars. That is an absurd number.

Tom And BlackRock hit 15 trillion in assets — up 6.6 percent last session. The market is printing money, literally.

Gerald Record everything, Tom. Remember when record highs were a sell signal? MS forward P-E 17.4, stock near its fifty-two-week high. The rally may be fully priced.

Marie Gerald, the sector ETF is within 1 percent of its high, but the earnings momentum is undeniable. Equity trading revenues don't just vanish. This is a buy.

Tom Yeah, if anything, the buybacks are a signal — BlackRock boosting to 550 million quarterly. They think the stock is cheap.

Gerald Or they're buying back at the top because they have nothing better to do with their cash. But fine, the print was good.

Marie It was a blowout.

Tom No doubt.

Gerald Alright, alright.

Marie So we like Morgan Stanley, BlackRock, financials broadly. But we keep an eye on that tape.

Gerald Meanwhile, oil surged 11.3 percent in a week. The Iran situation is deteriorating, and the U.S. options are dwindling. That's a war bid pure and simple.

Tom Yeah but gold is down 6.5 percent year to date, flat on the week. If the market thought this was a real crisis, GLD would be flying. It's contained.

Marie Tom, the SPY is near all-time highs. The WSJ flagged blockbuster stock sales that could overwhelm this bull market. If war premium escalates, the S&P is vulnerable.

Gerald So the trade is: buy USO, sell SPY? That's the hedge.

Tom Except USO is up 76 percent year to date and still 21 percent below its high. If tensions ease, that position gets crushed.

Marie Right, it's crowded. But the catalyst isn't going away. I think oil still has room. Gold? Not yet.

Gerald Gold not working is the tell. The market is too complacent about this war. I'd rather be long vol than long oil here.

Tom That's a fair point. Vol's cheap.

Marie Elevance Health dropped 8.5 percent last session. Membership is falling as rate hikes hit ACA plans. This is the ugly side of inflation.

Gerald Forward P-E 13.3, looks cheap, but if they keep losing members, it's a falling knife. Sell.

Tom And UnitedHealth got dragged down 1.6 percent. Even the defensive healthcare names aren't safe. year-to-date still up 24 percent, so some profit-taking.

Marie This is sector-specific, but it's a warning: rate hikes can self-destruct if they push people away. The insurance model is under pressure.

Gerald Agreed. Avoid both for now.

Gerald Right, then there's Thames Water. The FT reports they might have a liquidity shortfall within 12 months. Default risk in the UK water sector — that's not something you see every day.

Marie And the closest listed peer, United Utilities, is up 13.3 percent year to date. If the sector gets repriced, that's a sell.

Tom Is there contagion to credit? IG corporate bond ETF flat year to date, but a utility default could shake things.

Gerald Honestly, the UK water sector has been a mess for years. Government intervention is the wildcard. It'll either plug the hole or make it worse. I'd steer clear.

Marie So sell UU.L, and maybe hedge with a short on sterling? No, just kidding. But the tail risk is real.

Gerald Investing in UK water is like betting on the weather — you never know when it'll rain regulatory fines.

Tom Ha — that's dry. Like a Thames Water pension.

Marie Alright, moving on to Taiwan defense.

Marie Taiwan ordered dozens of sea drones with US tech — that's a direct boost to American defense contractors. ITA ETF up 6.5 percent year to date, near highs.

Tom And TSMC is still the semiconductor giant, but geopolitical risk is pulling it lower, down 4 percent this week. We're watching.

Gerald Defense spending is a long-term trend. I like ITA here. TSMC is too important to fail, but it's a hold.

Marie Agreed. Buy aerospace and defense, watch TSMC.

Tom India's monsoon is weak, crop sowing down 39 percent year on year. Inflation fears are spiking. INDA ETF down 10.7 percent year to date.

Gerald If the RBI delays rate cuts, equities could get hit further. Sell side is right.

Marie This is one of those macro risks that isn't in the headlines enough. The strong dollar could also be a headwind. I'd avoid emerging markets here.

Tom Agreed. Hard pass on INDA.

Marie CoinDesk has the most original take today: Visa, Mastercard, and Ripple are among 40 companies governing the x402 standard for AI agent payments. This is stealth blockchain adoption.

Tom Visa near its fifty-two-week high, forward P-E 23.9. Not cheap, but if payment rails get rewired, that's a long-term buy. And Marie, your hold on Visa from yesterday — now it's a buy.

Gerald The protocol settled 24 million dollars across 75 million payments last month. That's tiny. It's a narrative, not a revenue driver yet.

Marie Gerald, that's like saying the internet was a fad in 1995. This is infrastructure being laid for the next decade of payments. Mastercard is down 5 percent year to date, so it's not fully priced.

Tom And XRP, down 44 percent year to date. Pure speculation, but if Ripple becomes the standard, it could be huge. High risk, high reward.

Gerald Alright, I'll give you the narrative. But I'm not chasing XRP. Visa and Mastercard? Sure, they're already in your portfolio, Tom.

Marie Exactly. Visa and Mastercard are the buys here. XRP? If you're brave.

Marie Indonesia's Indika Energy is accelerating gold production as coal becomes too volatile. That's a fascinating pivot.

Gerald Gold miners GDX down 13.7 percent year to date. If more energy companies move into gold, that could signal a bottom. But gold itself needs to stabilize.

Tom Coal ETF near highs, but structural headwinds. I'd sell KOL here. The transition is real.

Marie Buy GDX, sell KOL. It's a clean pair trade.

Tom Amazon is building warehouses near Shanghai to help Chinese sellers with US customs. That's genius — strengthening their cross-border moat. AMZN up 3 percent last session, near all-time high.

Gerald And Alibaba snapped back 4.8 percent but still down 24.4 percent year to date. Amazon's move only makes it tougher for BABA.

Marie I'm cautious on BABA — short squeeze risk, but the trend is Amazon's friend. Sell BABA, buy AMZN.

Tom Amazon just keeps expanding the moat. It's an AI and logistics play.

Marie XPeng aims to produce over 1000 humanoid robots a month. Chinese EV maker pivoting to physical AI — that's either visionary or a Hail Mary.

Tom The stock is up 6.2 percent this week but still down 32.6 percent year to date. High risk, but the narrative shift could be huge. A thousand robots a month? That's either the future or the plot of a bad movie.

Gerald I prefer the robotics ETF, BOTZ, down 1.9 percent year to date. Diversified exposure to the theme without betting on a single name.

Marie Fair. We'll buy XPEV for the risk-takers, and BOTZ for the rest.

Marie So here's the picture: AI optimism and war anxiety side by side, with financials printing records. The UBS theme and IBM warning converge on the AI trade, and Morgan Stanley and BlackRock confirm the bull is alive on Wall Street.

Gerald But the counterargument: SPY is 1 percent from all-time high, financials at peaks, oil positions crowded. A ceasefire would crush oil longs and trigger a risk-on rally, hurting shorts. NVDA's forward P-E of 16.6 leaves room, but concentration risk is high.

Tom Right, and what's missing is the Fed. Not a single cluster mentions interest rates. The dovish pivot is priced in. Any hawkish surprise could unwind the AI/financials convergence.

Marie Exactly. The macro silence is deafening. And EM risks like India's monsoon and China's cross-border competition are being ignored. That's why the cleanest expression isn't a single stock — it's buying equity vol. Pair NVDA against IBM, USO against GLD, MS against ELV. Dispersion into earnings.

Gerald Yeah, active over passive. That's the trade.

Tom I still like the AI picks, but I'll take that vol hedge. Smart.

Marie As always, none of this is investment advice. But the signals are clear: the AI bull is back, but don't ignore the war bid.

Gerald And remember, when everyone's making record profits, sometimes the roof is about to cave in. Just saying.

Tom Ha, ever the optimist, Gerald. Alright, that's a wrap for this London edition. We're back later today at nine a.m. New York time. Hit follow on Spotify if you're just joining us — don't miss the next wave.

Marie See you then.