The market finished higher last week despite rising tensions with Iran, as investors looked ahead to this week’s inflation reports and the start of earnings season. The main focus on the policy front was the release of the minutes from Chair Kevin Warsh’s first FOMC meeting, which showed policymakers remain divided. A few members saw a case for a rate hike, while most preferred to leave policy unchanged as they continue to monitor incoming data. Overall, inflation remains the Fed’s primary concern, while worries about the labor market have eased.
One notable discussion centered on AI, with several officials arguing that the current wave of AI investment could add to inflation in the near term through stronger demand and capital spending, even if it ultimately boosts productivity and lowers inflation over the long run. The Fed also announced five task forces to review its policy framework, covering communications, data, productivity, and inflation. The groups largely reflect Warsh’s priorities, including less reliance on forward guidance, greater use of alternative data, and a stronger emphasis on AI’s role in shaping productivity and inflation. This week, attention turns to the start of earnings season, with JPMorgan and Bank of America reporting on Tuesday alongside the Consumer Price Index. While headline inflation is expected to show some easing, upside risks remain given the uncertainty surrounding the Iran ceasefire and its potential impact on energy prices.
Samsung Earnings & SK Hynix Begins Trading on the NASDAQ
Last Tuesday, Samsung reported blowout earnings, more than doubling revenue and posting operating margins of over 50%, yet the market reaction remained dour, with shares slumping over 10% as earnings expectations were only beaten by 6%. The ongoing memory shortage was a primary driver for the beat, with both DRAM and NAND prices increasing by 40% and 50%, respectively, in Q2 of this year. Although the results were strong, markets are beginning to grow anxious about the durability of these earnings, especially as demand destruction begins setting in for memory customers, and as seen by Apple, firms are potentially starting to look for alternative suppliers, particularly from Chinese manufacturers.
More developments occurred from South Korea, as SK Hynix raised $26.5 billion for a US ADR listing, making this the largest first-time sale by a foreign company, and will now be responsible for a new wave of leveraged ETFs around a single stock. Issuers such as ProShares, Leverage Shares, and REX Shares are already preparing 2x leveraged ETFs tracking the SK Hynix ADR, introducing an additional source of mechanical buying and selling pressure similar to Korea, where leveraged products already account for roughly 70% of total KOSPI trading volume. Much of the capital raised by both SK Hynix and Samsung is being directly reinvested back into the AI infrastructure build-out, as Samsung has pledged to spend over $73 billion in building out capacity in 2026, and SK Hynix is earmarking all of the ADR capital raised in the US to be put back into expanding capacity.
Overall, memory giants still represent crucial bellwethers for the AI trade. Both the long-term agreements these companies establish, and CAPEX trends will continue to be closely monitored; yet with much leverage entering these names through ETFs, it will become increasingly difficult to discern noise from company fundamentals.
Lido Advisors, LLC is an SEC-registered investment adviser. Please note that SEC registration does not denote any particular competence or ability and no inference to the contrary should be made. For complete information on the services we provide and our fees, please review our Form ADV at adviserinfo.sec.gov, call 800-301-LIDO, or mail us at 1875 Century Park East Suite 950, Los Angeles, CA 90067.
The information contained herein reflects Lido’s views as of the date of this newsletter. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. Lido has obtained the information provided herein from various third-party sources believed to be reliable but such information is not guaranteed. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Lido is not responsible for the consequences of any decisions or actions taken as a result of information provided in this newsletter and does not warrant or guarantee the accuracy or completeness of this information.
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Lido specifically disclaims any and all liability arising from the information or illustrations presented in these materials and is not responsible for the consequences of any decisions or actions taken as a result.
Lido Advisors, LLC is an SEC-registered investment adviser. Please note that SEC registration does not denote any particular competence or ability and no inference to the contrary should be made. For complete information on the services we provide and our fees, please review our Form ADV at adviserinfo.sec.gov, call 800-301-LIDO, or mail us at 1875 Century Park East Suite 950, Los Angeles, CA 90067.
The information contained herein reflects Lido’s views as of the date of this newsletter. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. Lido has obtained the information provided herein from various third-party sources believed to be reliable but such information is not guaranteed. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Lido is not responsible for the consequences of any decisions or actions taken as a result of information provided in this newsletter and does not warrant or guarantee the accuracy or completeness of this information.
Past performance is not indicative of future performance. The information in this report is for informational purposes only and should not be relied upon as the basis of an investment or liquidation decision. Nothing in this report shall be construed to be a solicitation to buy or offer to sell any security, product or service to any non-U.S. investor, nor shall any such security, product or service be solicited, offered or sold in any jurisdiction where such activity would be contrary to the securities laws or other local laws and regulations or would subject Lido to any registration requirement within such jurisdiction. All content herein has been obtained from sources deemed to be reliable, but is subject to unintentional errors, omissions and changes without notice, and is not warranted as to its accuracy or completeness. You should not rely on the information contained herein, and should rely solely on, and carefully read, the appropriate offering and related subscription materials relating to any specific investment product before making any investment decision.
Not all investments are suitable for all clients. It should not be assumed that any security listed or any recommendations made in the future will be profitable or without loss, including risk of loss of principal, or will equal any prior performance. All investments involve the risk of potential investment losses including the potential risk of loss of principal as well as the potential for investment gain. Further, the prior performance figures indicated herein represent portfolio performance for only a short time period and may not be indicative of the returns or volatility each portfolio will generate over a long time period. The performance of the portfolios should also be viewed in the context of the broad market and general economic conditions prevailing during the periods covered by the performance information. Any references to future returns/risk are not promises of the actual return the client portfolio may achieve. Before investing, investors should seek financial advice regarding the appropriateness of investing in any securities of investment strategies discussed. Not all investments are suitable for all investors.
The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.
Lido specifically disclaims any and all liability arising from the information or illustrations presented in these materials and is not responsible for the consequences of any decisions or actions taken as a result.
The market finished higher last week despite rising tensions with Iran, as investors looked ahead to this week’s inflation reports and the start of earnings season. The main focus on the policy front was the release of the minutes from Chair Kevin Warsh’s first FOMC meeting, which showed policymakers remain divided. A few members saw a case for a rate hike, while most preferred to leave policy unchanged as they continue to monitor incoming data. Overall, inflation remains the Fed’s primary concern, while worries about the labor market have eased.
