INTERNAL — DESK MEMO
RE: Everyone please stop calling this a rally
To whoever keeps putting "S&P 500 at record highs" on the morning note without a footnote: cut it out. Technically true. Structurally a lie. Four stocks did this. Four.
Since July 29th, Microsoft, Nvidia, Amazon, and Alphabet have shoveled roughly $2.5 trillion of market cap onto the board between them — Microsoft and Nvidia around $700 billion apiece, Amazon nearly $500 billion, Alphabet north of $600 billion. Meanwhile the equal-weighted S&P is up less than 2%, the median member of the index is up less than 1%, and Apple — Apple, a company that still makes actual physical objects people buy with their own money — is down 8% and has erased $400 billion of value over the same stretch. Read that spread again. The four horsemen of hyperscaler capex added more market value in eleven trading days than most S&P constituents will move all quarter, in either direction, and the index-level number is smoothing all of it into one clean, comforting headline: stocks at records. Stocks are not at records. Four stocks are doing enough compounding to drag 496 others across a finish line they didn't earn.
I don't say this to be dramatic. I say it because someone on this desk is going to open a position this week based on "the market" being strong, and the market, in the sense that phrase used to mean something — broad participation, healthy breadth, money rotating into cyclicals and small caps because the economy is actually fine — is not strong. It's four capex-financed giants re-underwriting the entire AI buildout thesis in real time, and everyone else is along for the ride or getting run over by it.
Here's what's actually holding this up, and I want it in writing because I think we're two bad prints away from finding out how load-bearing it is. Global semiconductor sales hit a record $120.6 billion in May, up 104% year-over-year — the fifteenth straight monthly record, which at some point stops being a growth story and starts being a base-effect story, and nobody on this desk has done the work to tell me which. Broadcom is guiding AI semiconductor revenue up over 200% year-over-year to $16 billion this quarter. Micron is guiding to a $50 billion revenue quarter and is up over 660% in the past year despite shares sitting 24% off their July peak — which tells you the stock already front-ran the guidance and then some analyst downgrade or macro wobble knocked 24% off it in a month, and it's STILL up 663%. That is not a valuation. That is a rocket with a parachute strapped on as an afterthought.
Tuesday's session is the cleanest example of what's actually driving price action right now: the SOXX ripped over 6%, Micron and SK Hynix jumped 8% and 6%, Marvell popped 14% off a product launch at a flash memory conference, Intel rallied 10%, AMD jumped 7% ahead of earnings. That's not fundamentals repricing gradually. That's a sector that got taken to the woodshed in June and July — remember the Nasdaq's worst week in over a year after the June 5th jobs scare, Nvidia and Broadcom both down more than 6% in a single session — snapping back so violently that the snapback itself has become the story. Fifty-seven of sixty-one names in the chip basket are higher since July 29th, median gain around 15%. That's not conviction. That's a coiled spring that got kicked twice and is now overcorrecting in the other direction, and everybody's treating the overcorrection like it's discovery of new information.
And underneath all of it sits the actual load-bearing assumption nobody wants to underwrite out loud: that hyperscaler capex, currently accelerating toward $750 billion, keeps accelerating in a world where the Fed chair just told markets he's "not constrained by market prices" and Friday's jobs report was bad enough to send stocks to records on rate-cut hope while simultaneously being the kind of print that, six months from now, either confirms a soft landing or confirms we already tipped into something worse. Both of those futures are being priced by the SAME rally right now. Gold ripping to $4,350 on recession-hedge flows and semiconductors ripping on AI-capex-forever flows are not compatible stories about the economy. One of them is wrong. The desk needs to pick a side before the market picks it for us.
So when the morning note says "records," ask records for whom. Four companies are writing checks big enough to make the index number lie convincingly. That's not breadth. That's concentration risk wearing a party hat, and nobody's checked what happens to the room when the four people paying for the party stop showing up.
— circulate to the desk, not upstairs, yet
