Stocks party on Iran pause. AI's revolt is the hangover.

Transcript

Tom Stocks party on the Iran pause, but AI investors are starting a revolt. Monday, July twenty-seventh, London Edition — let's get into it.

Marie Good morning, I'm Marie, with Tom and Gerald. Oil just dropped over four percent — that's the easy headline. But underneath, a whole different story is brewing in Big Tech.

Gerald Yeah look, crude down four percent on the US-Iran pause — the US Oil Fund up eleven percent in a week, so this relief selloff has room. We've been saying sell the oil ETF.

Marie Hold on — the pause is fragile. One drone and we're back above a hundred. MarketWatch's triple threat was all about surging yields and oil breaking out. That reversed today, but it's not over.

Tom Exactly, and with crude down, bond yields should follow. Buy the long-duration Treasury ETF — it's just one percent above its fifty-two week low. Any dip in yields and it rips.

Gerald To be fair, long bonds at these levels are a coiled spring if the Fed blinks dovish. But energy equities... the energy sector ETF up thirty percent year to date. The easy money's done — falling crude plus rotation out of value.

Marie Right, and the rotation is real. But the convergence today is the AI spending revolt. Bloomberg says investors are in open revolt over Big Tech's capital returns, and CNBC warns wider credit spreads will make the AI buildout pricier. That's a two-punch combo.

Tom Exactly.

Gerald Right — that's the whole story.

Marie Nailed it.

Tom Whoa — you're saying the AI trade is done? Nvidia's at sixteen times forward earnings, buddy. That's not expensive for that growth. And the seven-hundred-billion US-Korea deal? More demand.

Gerald Tom, the same Nvidia you called a buy yesterday? Up ten and a half percent year to date, fine. But the revolt is about whether the billions in capex generate returns. If credit tightens, expansion plans slow. CNBC's take is key: debt markets choke the buildout.

Marie Exactly. The relief rally from cheaper oil won't thrive if the growth engine gets a margin call. Our view: these stories are incompatible. The market is split.

Tom But look at the analyst calls — Morgan Stanley five-oh-two on Broadcom, Stifel two-thirty on CrowdStrike. These are long-term secular growth stories.

Gerald Broadcom already up twelve point nine percent year to date, Tom. Near-term upside limited. CrowdStrike up sixty-one point eight — when does that pullback come?

Marie And AST SpaceMobile down twenty-nine percent with a hundred-dollar target from Piper? That's a turnaround play if you can stomach the volatility. But the luxury outlets — Tapestry at forty-two times trailing...

Gerald Ha — forty-two times? That's heartburn material. Ralph Lauren at twenty-four point eight is fairer, but Capri at zero point seven forward after a thirty-six percent plunge... cheap for a reason.

Tom Oh come on — that's brutal.

Tom Wait, Capri's a deep value play! Michael Kors outlets are cash machines. You love value, Gerald — zero point seven forward?

Gerald I love value that isn't a value trap. Kors outlet sales aren't exactly a growth story, mate.

Marie Alright, but the key is the Japan angle. Bain reaping seventeen billion from Kioxia — that's a maturing PE market. The yen at multidecade lows means BOJ rate hike bets are up.

Tom And hedged Japan, the currency-hedged ETF, up twenty-one percent year to date! If BOJ hikes, yen strengthens, hedged Japan outperforms. But everyone's in that trade, so maybe wait for a pullback.

Gerald Nah, the broader Japan equity story is real. The Japan ETF is at its fifty-two week high, up twelve percent year to date. That PE exit signals foreign capital finally trusts Japan. Structural shift.

Marie Exactly.

Tom Yep.

Marie But let's talk UK banks. FT reports lenders accuse the Bank of England of ignoring Wall Street's capital edge — twenty-two and a half billion extra burden.

Gerald That's a direct hit to Lloyds and Barclays. Lloyds near its high, Barclays at one point one times book. Sell Lloyds, sell Barclays — the market hasn't priced this disadvantage.

Tom But JPMorgan at its high too, Gerald. The US edge is priced. If everyone's crowding into US banks, that trade loses edge.

Marie Hold on — the UK capital disadvantage has been there for years. If the BOE ignores it, that's not new. The real risk is if the UK economy slows, banks get hit regardless of capital levels.

Gerald Fair enough, but the FT piece adds new data — it's a fresh catalyst. I'm watching.

Tom Alright, but the US-Korea AI deal — seven hundred billion dollars from Samsung, SK, and Nvidia. That's just more demand for chips. Nvidia's still the linchpin.

Gerald Tom, Nvidia forward P-E sixteen. The deal is sentiment booster, sure, but it's already priced. And remember your buy call yesterday? Already up half a percent? Priced in.

Marie Wait — but Samsung's memory business could be the sleeper. Shares are flat, offering a potential entry if AI infrastructure really takes off. SK Telecom up seventy-one percent year to date though, so caution.

Tom I'm telling you, the AI capex cycle isn't over. If earnings surprise, the revolt will fade. And the triple threat? The oil plunge today contradicts it — technical breakdown may be false.

Marie See, this is what I mean. The triple threat says yields surging, oil breaking out, dollar uptrend. Today oil plunged and bonds rallied. The setup is already breaking. The S&P is just three percent below peak.

Tom Exactly! If the Fed leans dovish, bonds get run over and stocks melt up. I'm watching Nvidia earnings, not triple threats.

Gerald Alright, but long bonds near lows means the bond market already priced for slowdown. If there's no recession, yields could spike again. That's the real threat.

Marie Which brings us to our view: it's not directional, it's dispersion. Active management over passive, cash over credit. Long-delta hedges like the volatility ETF, down fifty-three percent from its high, for a week that could break either way.

Tom Volatility hedge? I'd rather buy the dip in semis, buddy.

Gerald Of course you would, Tom. But the credit angle is underappreciated. If spreads widen, the high-yield bond ETF gets hit. That's my sell.

Tom pff, okay.

Marie And don't forget the Fed meeting Wednesday. Rate options pricing a sixty percent chance of a cut. Powell could push back. The second-order trade is dispersion, not direction.

Tom Right, but the buy-the-dip mentality is strong. If Big Tech earnings surprise, the revolt is over. I'm watching the tech sector ETF — up twenty-three point seven percent year to date, but that could run further.

Gerald Tom, remember when you said semis were cooked in Q2? And they ripped. Now you're all-in again. Look mate, check the credit spreads. That's the warning.

Tom Ha — fair enough, Gerald. I've been wrong before. But this AI bonanza drowns out everything else, just like our weekend call said.

Marie Speaking of which, that call on Alibaba and Amazon from yesterday? Interesting day ahead. But today, the convergence is the revolt. And Gerald's right about the credit market angle.

Gerald CNBC's original take — the debt market impact on AI buildout — that's the one to watch. Few are making that connection. It's structural.

Tom Totally.

Marie Spot on.

Gerald AST SpaceMobile with a hundred-dollar target? Piper must be smoking something. But hey, turnaround stories sometimes work.

Tom I mean... he's not wrong.

Tom Japan's the overlooked story. Bain's exit is huge. And if BOJ hikes, the yen play is on.

Gerald Exactly. Hedged Japan is up twenty-one percent. But if the yen strengthens further, that's more upside. The BOJ meeting is the catalyst.

Marie Look, today's signals map a split market. Oil relief versus AI revolt. The Fed could tip it either way. As always, none of this is investment advice.

Tom We're back later today at nine a.m. New York time. If you're just finding us, hit follow on Spotify — or check investmentflash.com for charts and sources. See you then.

Gerald Catch you in a few hours. Cheers.

Marie That's the London Edition. Back at nine a.m. New York.