AI inflation concerns collide with Middle East situation turmoil! Market nerves once again tense as non-farm data and Powell's speech become key tests for US stocks this week.

Last week, the U.S. stock market experienced a roller coaster-like situation triggered by market fluctuations in the outlook of artificial intelligence (AI) spending. As the "non-farm employment week" approaches, investors will also see a series of heavyweight events this week. Due to the U.S. Independence Day holiday, this week is a "short trading week" - with the U.S. stock market closed on Friday. The most important event this week will be the U.S. June non-farm employment report released on Thursday. However, before that, a series of employment indicators such as Job Openings and Labor Turnover Survey (JOLTS), ADP private sector employment data, and layoff plans will provide clues about the economic situation. Consumer confidence surveys, as well as economic activity data released by S&P Global, Inc. and the Institute for Supply Management (ISM), are also worth watching. While corporate earnings reports are relatively quiet, there is still one heavyweight report to watch - NIKE, Inc. Class B (NKE.US) will announce its earnings on Tuesday. In addition, Federal Reserve Chairman Powell will attend the annual global central bank conference hosted by the European Central Bank on Wednesday for the first time, exchanging with the central bank governors of the European Central Bank, the Bank of England, and the Bank of Canada, and delivering his second speech during his tenure. Powell's first speech after taking office has already caused a stir in the market. In this week's speech, Powell is likely to continue emphasizing "data determines policy" and inflation, and may once again explain why forward guidance is being cancelled. It is worth noting that the U.S. Supreme Court will soon rule on whether Fed Governor Brainard can continue in office. Last year, U.S. President Trump announced the dismissal of Fed Governor Brainard, citing issues in mortgage applications as the reason. However, it is widely understood that the real reason is not mortgages, but that Trump wanted to replace her with his own person. If the Supreme Court supports Trump, future presidents may arbitrarily replace Fed officials they do not like, which would greatly jeopardize the independence of the Fed and could lead to a market plunge. Middle East situation changes repeatedly On June 28 local time, a senior U.S. official revealed that the U.S. and Iran have agreed to stop mutual attacks and plan to hold a meeting in Doha, the capital of Qatar on June 30, to resolve the dispute over the Strait of Hormuz. Another U.S. official stated that the U.S. and Iran will "temporarily" cease hostilities, allowing vessels to pass freely through the Strait of Hormuz while technical talks continue. U.S. officials and other informed sources have confirmed that the U.S. and Iran plan to hold a meeting on the 30th. However, as of now, neither the U.S. and Iran nor the intermediaries in the current U.S.-Iran negotiations, Pakistan and Qatar, have made official statements. On June 27, U.S. military officials launched strikes on multiple targets in Iranian territory again, citing Iranian attacks on commercial ships near the Strait of Hormuz. On June 28, the Iranian Islamic Revolutionary Guard Corps stated that it had made a "decisive response" to recent U.S. "aggression" and would adopt a harder line towards "violating" vessels, threatening to launch a "hellish" attack on U.S. military bases. The U.S. and Iran are once again engaging in military clashes over navigation in the Strait of Hormuz. Media and analysts believe that behind the current military confrontation between the U.S. and Iran, the two sides are still vying for control over navigation in the Strait of Hormuz. Iran aims to strengthen its control over the Strait of Hormuz. After the Strait was opened, the International Maritime Organization recommended two evacuation routes, the northern route of the Strait of Hormuz on the Iranian side and the southern route on the Omani side. However, it has been reported that Iran emphasizes that ships must use the northern route of the Strait of Hormuz approved by Iran for navigation, and warns ships not to sail outside that route. According to a statement from U.S. Central Command, the attacked cargo ship was sailing along the Omani coast with the flag of Singapore. Experts believe that Iran is trying to strengthen its control over the Strait of Hormuz's shipping lanes, transit permits, and other areas by forcing ships to sail in the channel closest to Iran, and strengthen its bargaining power in subsequent negotiations with the U.S. The U.S. is attempting to gain the upper hand in the Strait of Hormuz game through limited military strikes and establish military deterrence. Some analysts suggest that the U.S. has repeatedly claimed that the Strait of Hormuz will be completely open. If there is no response after the attack on the cargo ship, it will lead the U.S. to a passive position in the navigation competition with Iran and further weaken its credibility in regional security affairs. As the U.S. and Iran were set to continue technical negotiations at the end of this month, the sudden military clashes between the two sides have raised concerns that the situation in the Middle East could escalate once again. However, analysts believe that the scale of military actions by both sides is limited, and there is no immediate risk of a large-scale conflict. At the same time, some analysts pointed out that the recent mutual attacks once again exposed the vagueness and fragility of the U.S.-Iran Memorandum of Understanding. The U.S.-Iran Memorandum of Understanding is worded vaguely, stating that Iran must "make every effort to ensure the safe passage of commercial ships," but does not specify specific implementation measures, leading to different interpretations of navigation through the Strait of Hormuz and ultimately resulting in the recent military clashes. Analysts pointed out that the U.S.-Iran Memorandum of Understanding is more of a principle document, and the two sides have not reached a consensus on the specific terms of implementation. The recent clashes will further weaken the already fragile mutual trust between the U.S. and Iran, deepen doubts about each other's willingness to comply, and add uncertainty to future technical negotiations. A series of employment data to be released soon! The market awaits an important "check-up" on the U.S. economy Although actual data shows that finding a job is becoming increasingly difficult, and the AI trend has prompted many companies to re-evaluate their employment needs and pause hiring, the sentiment in the labor market may not be optimistic. Whether this is the actual situation or market perception is still debated, but so far, for the truly important arbiter - the Federal Reserve, the overall performance of the labor market remains satisfactory. As the Federal Reserve shifts its focus towards its other goal - controlling inflation, its previous concerns about the labor market have largely subsided. However, this Thursday's release of the June employment report, along with other labor market data, will provide crucial background for determining just how "hot" the U.S. economy truly is. If the labor market heats up again, it would mean rising inflation risks, further solidifying the Fed's hawkish stance and reducing the likelihood of a rate cut. According to surveys, the market currently expects an increase of 123,000 jobs in the U.S. in June, with the unemployment rate expected to hold at 4.3%. Meanwhile, oil prices are falling. Last Friday, the global benchmark Brent crude oil price fell below $70 per barrel. While gasoline prices are slowly coming down following the rule of "rising like a rocket, falling like a feather," according to data from the American Automobile Association (AAA), the average gas price in the U.S. has dropped to $3.90 per gallon. Of course, this overall situation is conducive to a decrease in inflation - which is one of the main concerns for Kevin Warsh and the Federal Reserve. However, at the same time, this could bring new troubles. Apollo Global Management Inc.'s chief economist Torsten Slok pointed out last week that the market easily interpreted the fall in oil prices as a "drop in inflation", further stimulating demand, while the U.S. economy is already quite hot. Slok wrote, "The current market narrative has shifted to reopening the Strait of Hormuz will further heat up the economy and force the Federal Reserve to raise interest rates quickly." AI trading questioned by the market Last week, storage chip stocks experienced significant volatility. Micron Technology, Inc. (MU.US) reported a strong financial report, showing demand locked in for the next few years, which is a positive signal for AI infrastructure investment logic. However, news that OpenAI has postponed its initial public offering (IPO) has raised new concerns for investors, prompting them to ask an obvious question: why? And even further: what went wrong? At the same time, AI demand may be proving for the first time that the massive investments in data center infrastructure are justified. Previously, investors had been concerned that the free cash flow of mega-scale cloud computing companies was almost entirely being consumed by AI capital expenditures, and if AI revenues finally start catching up, it would clearly show that these bets are paying off. In the early stages of AI development, market discussions were mostly centered around supply - including investment scale, chip sales, and algorithm development. The truly important question in the next stage will be measuring AI demand, i.e., how many people are actually using AI. However, as many AI companies are still privately held and OpenAI may continue to remain unlisted, data that reflects real demand remains very limited. While waiting for this data, one thing that last week's impressive financial report from Micron Technology, Inc. revealed is already very clear: the cost of the AI supply chain is becoming extremely large. This cost pressure has also forced leading companies like Apple Inc. and Microsoft Corporation to raise prices. On June 25, Apple Inc. announced a price increase for Mac, iPad, and home devices to counter the unprecedented shortage and cost pressures on memory chips and storage driven by the expansion of AI data centers. An Apple Inc. spokesperson said, "The rapid expansion of AI data centers has led to an extraordinary surge in memory and storage demand," and the company has "never seen chip prices rise so fast and so much," and stated that they had previously absorbed the cost pressure increase for consumers to the best of their ability, "but now it is time to start raising prices." A few hours after Apple Inc. announced the price increase, Microsoft Corporation also announced that due to the continued rise in the cost of key components, consumers would have to pay higher prices when buying Xbox gaming consoles in the future. Microsoft Corporation pointed out that the main reason for this round of price increases was the significant rise in storage and memory costs, stating, "Gaming console storage and memory prices have already risen by more than 2.5 times, and we expect it to double again by the fall of 2027." Since the second half of 2025, the global storage chip industry has seen a rare bull market, especially for LPDDR and other DRAM chips used in smartphones, which have faced a continuous shortage. Market research firm Counterpoint noted that in the second quarter of 2026, LPDDR4/5 prices are expected to increase by about two times compared to the fourth quarter of 2025. The price increases by Apple Inc. and Microsoft Corporation indicate that the upstream cost increases have exceeded the capacity for these top companies to absorb them, and the costs of AI are now flowing from data centers to consumers. As a result, the market is asking, how long can upstream profits sustain if consumers are unwilling to pay for AI costs? The price increases by Apple Inc. and Microsoft Corporation signal an increase in industry pricing power that may come at the expense of sacrificing future demand, prompting the market to completely reprice AI-related semiconductor stocks. Charu Chanana, Chief Investment Strategist at Shengbao Market, said, "The storage chip market still has sustained momentum, but positive factors have become more selective, while negative factors cover a wider range of the market." "The risk is that the current stronger storage chip cycle may drag down the entire AI industry chain tomorrow, and the market has already begun to price this in."