Oil at $98. The AI selloff is an invitation.

Transcript

Tom Oil at ninety-eight dollars, AI selling off — and somehow the bull market's still kicking. Today's signals are wild, buddy.

Marie I'm Marie, with Tom and Gerald. This is Investment Flash, New York Edition, July twenty-third.

Tom Gerald, your buy oil call yesterday up another two percent. You're basically printing money at this point.

Gerald Yeah, well, the Houthis attacked two Saudi tankers, so it's not exactly a buy-and-relax trade. But the US Oil Fund jumped another two-point-two percent last session, up ninety-one percent year to date. It's a supply shock, not a gentle climb.

Tom Right? And it's still fifteen percent below its high! If this escalates, that's a lot of room.

Marie Hold on — you two are talking like oil at ninety-eight is just a number. That's inflation straight into every input cost. This isn't just a Ukraine rerun; it's a Strait of Hormuz tail risk nobody's priced.

Gerald Exactly. The AI selloff might be a correction, but if oil spikes further, growth multiples get crushed. And you know what nobody's talking about? The dollar. Oil spike tightens financial conditions globally.

Tom Okay, fair. But the AI selloff is an invitation, buddy. Nvidia bounced two-point-three percent last session, trades at sixteen-point-five times forward earnings. That's a gift.

Gerald Sixteen-point-five times forward? I'll believe it when they deliver. But this JPMorgan note — it's straight out of 1999. Hyperscalers versus chip stocks diverging. The next few weeks are critical.

Marie And the bond market's already flashing yellow. Record three point sixty-eight trillion in corporate issuance in the first half, partly AI capex. The investment-grade bond ETF is down three-point-two percent year to date, the high-yield bond ETF off one-point-four. Investors are demanding higher yields to absorb this wall of supply.

Tom So credit is tightening, oil is surging — Gerald, you must be loving this, your bond doom-loop returns.

Gerald Look mate, I'm not loving it, but fair value is a thing. And those bond ETFs near their fifty-two-week lows? If the dollar rips, they break lower.

Marie Okay but here's the flip side. Utilities. Wells Fargo says they're the next AI trade. The Utilities Select Sector SPDR jumped two-point-two-five percent and is near its high. AI data centers need power. That's a defensive growth play.

Tom I'm on board. NextEra Energy up ten-and-a-half percent year to date, still ten percent off its high. Duke Energy with a four percent dividend, five percent below its high. It's the AI buildout with a yield cushion.

Gerald To be fair, utilities as an AI play is actually clever. But it's a rate-sensitive sector. If yields keep rising, the dividend attraction fades. Still, I'll give you — the chart looks constructive.

Marie Wait — Gerald just admitted Tom might be right about something.

Gerald Ah, I said constructive, not bullish. There's a difference.

Tom Ha! I'll take it. But speaking of growth, Chinese EVs are invading Europe in style. NIO, XPeng, Li Auto, Xiaomi — all posting big sales jumps. BMW and Volkswagen are getting destroyed.

Marie This is structural. The Financial Times says the assault has barely begun. Volkswagen is down thirty percent year to date, BMW down forty percent. They're near their fifty-two-week lows.

Gerald And on the buy side, NIO is down forty-two percent from its high, XPeng fifty-five, Li Auto sixty-one. These stocks are priced for failure. If the expansion holds, there's asymmetric upside.

Tom Exactly. The risk-reward on NIO is nuts. Europe's luxury market is huge.

Marie Hold on — 'priced for failure'? They're also Chinese companies with delisting risk and potential EU tariffs. The recent U.S. sanction threats on Chinese AI startups just add to the overhang. The China internet ETF is down twenty-five-point-eight percent year to date.

Gerald Fair enough. The China internet sell signal is honestly the cleaner play if sanctions escalate. But the auto trade is separate. Xiaomi trading at fourteen-point-nine times trailing earnings, down fifty-six percent from its high — that's value if you can stomach the risk.

Tom And the chipflation angle — Micron up two hundred four percent year to date, another twelve-point-five percent last week. AI memory demand is so hot carmakers are considering price hikes. Toyota down twenty-eight percent from its high on margin fears.

Marie That's the squeeze. AI spending is inflating costs across the supply chain. Micron's forward P-E is only six-point-two. The run might not be over.

Gerald Six-point-two times forward? That's either a steal or a disaster waiting to happen. Memory cycles are brutal. But honestly, the pricing power is real.

Tom Gerald just called something cheap. Are you feeling okay?

Gerald I'm not a machine, Tom. But speaking of cheap, the rare earth ETF — ticker REMX — is down thirty-six percent from its high. Toyota Tsusho is spending seven-point-four billion on recycling to reshape supply chains.

Marie Recycling could cap rare earth prices long term, but near term, it's a strategic shift. If it reduces China's dominance, the whole complex could re-rate.

Tom Thirty-six percent below its high is deep value, but it's speculative. I'd rather play the AI infra buildout with utilities.

Marie What about crypto? Bitcoin wilting as oil and rates rise. Clarity Act odds down to thirty-eight percent. The long-duration Treasury ETF is one percent above its fifty-two-week low.

Gerald And that's the macro cocktail. Sell long-duration Treasuries, sell bitcoin — exactly what we flagged yesterday. The oil-driven inflation fears are pushing yields higher, hammering rate-sensitive assets.

Tom Yeah, the bitcoin trade was spot on. But if oil retreats, crypto could snap back. The Houthis have a history of tactical strikes, not sustained blockades.

Marie That's the bull case. But right now, the momentum is clearly down.

Tom True.

Gerald Right.

Marie No question.

Tom But the most original take today: MarketWatch says the AI selloff might save the bull market. It's a healthy purge of froth.

Gerald Classic bull market rationalization. 'The selloff is good for us'. I've heard that before.

Marie No, but that's exactly my point. The pullback sets up a more sustainable base. If oil cools, AI rips.

Tom Exactly! Nvidia at two-hundred-twelve, forward P-E sixteen-point-five. That's a gift relative to growth. The utility rotation proves the market is rotating, not exiting.

Gerald Alright, but the bear case is the dollar. If oil stays elevated, the dollar strengthens, global financial conditions tighten, and EM and credit get smoked. China internet, investment-grade bonds, high-yield — all vulnerable.

Marie Which is why the second-order trade is utilities plus AI. Defensive yield plus growth optionality. The Utilities SPDR, NextEra, Duke Energy — they're the hedge.

Tom That's the rare tape. A hedge that works if oil stays high AND if AI reasserts. I love it.

Gerald I'll admit, it's a coherent trade. Just watch the bond yields. If the long-duration Treasury ETF breaks its low, the whole thesis shifts.

Marie And as always, none of this is investment advice. Just our read of the signals.

Tom Exactly.

Gerald Right.

Marie Yep.

Tom So, Gerald, you're holding oil and short bonds. Marie, you're adding utilities. I'm buying the Nvidia dip and Chinese EV names.

Gerald Diversified chaos, as usual. But it makes sense. The push-pull between oil inflation and AI deflation is the story.

Marie And it's not going away tomorrow. We're back at seven-thirty a.m. London time for the London Edition. Until then, hit follow on Spotify if you're just finding us — or check investmentflash.com for the full digest.

Tom See you then, buddy. And Gerald, try not to get too excited about credit spreads.

Gerald I make no promises. But I'll be here.

Marie Alright, take care everyone.