Today
Broadcom delivered strong quarterly results yesterday, but good wasn’t good enough for investors. Instead, investors focused on the company’s guidance, with Q3 AI semiconductor revenue forecast at $16 bln, below expectations of $17 bln, while management left its full-year AI revenue outlook unchanged despite strong demand (more on that in co. news below). Shares are down -14% premarket at the time of writing, weighing on other AI-linked stocks including Marvell, Super Micro, and Intel. U.S. futures are mixed with the S&P and Nasdaq looking to open lower, while the Dow is in the green. The TSX is little changed this morning after falling -1% yesterday, with profit taking likely contributing to the decline after the index reached a record high and surpassed 35,000 for the first time just a day earlier. The weaker tech sentiment carried into Asia, where Japan’s Nikkei fell -1.5% and South Korea’s Kospi declined -1.8%. Europe is bucking the trend, with Germany’s DAX and France’s CAC edging higher.
An agreement between Israel and Lebanon was announced this morning, which would implement a new ceasefire, increasing optimism that a broader U.S.-Iran deal may be reached. The ceasefire comes after an escalation in regional tensions, including Iranian attacks targeting Kuwait and Bahrain, U.S. strikes near the Strait of Hormuz, and continued Israeli operations in southern Lebanon. While the announcement has helped ease oil prices on hopes of a diplomatic breakthrough, there are many obstacles to overcome before a full deal can be achieved. Israel has indicated it will continue some military operations in Lebanon, Hezbollah has not yet publicly endorsed the agreement, and Iran continues to demand sanctions relief, access to frozen oil revenues, and concessions related to the Strait of Hormuz. Trump has suggested that further progress could occur as soon as this weekend, while Iranian leaders continue to signal that negotiations remain active.
United front? Canada and Mexico may have coordinated their approach ahead of the CUSMA review, with both countries formally recommending that the trade pact be extended for another 16 years. The original agreement was structured with a 16-year term and a six-year review cycle, a compromise reached after the U.S. initially pushed for a much shorter five-year sunset clause. By advocating for a full extension, Canada and Mexico are signalling a preference for long-term certainty rather than reopening the agreement from scratch. Both countries emphasized the importance of a stable framework for investment and economic growth, while acknowledging that updates may be needed. Canada also noted that discussions around existing U.S. sectoral tariffs will remain a priority. While auto content rules and tariffs still need to be addressed, the coordinated position from Canada and Mexico is a sign that renewal, rather than replacement, remains the starting point for negotiations for both countries.
There is debate on whether investors are focusing too much on the inflationary impact of the Iran war while overlooking another source of price pressure, the AI investment boom. Massive spending on data centers, semiconductors, networking equipment, power infrastructure, and software is expected to exceed $800 billion this year alone, creating bottlenecks in key parts of the technology supply chain. Recent Fed research found that software-related prices have risen more than expected, with shortages contributing to increases in tech products. Strategists argue that AI is currently acting as an inflationary force rather than the productivity-driven deflationary force which many had hoped for. For central banks, this raises the possibility that inflation remains elevated even if energy prices normalize, forcing policymakers to face a second source of inflation pressure that may prove more persistent than the Iran-related energy shock.
As SpaceX, Anthropic, and potentially OpenAI prepare for what could become the largest IPOs in U.S. history, investors are being reminded that even the most anticipated public offerings can be derailed by missteps, regulatory issues, or execution issues during the IPO process. History has some cautionary tales like when Larry Page and Sergey Brin violated SEC quiet-period rules before the Google IPO by giving an interview to a “magazine”. Salesforce delayed its IPO after CEO Marc Benioff spoke publicly about the company, while WeWork’s offering collapsed after investors scrutinized governance concerns surrounding founder Adam Neumann. For SpaceX, much of the focus will center on whether Elon Musk can navigate the highly regulated IPO process without creating distractions through public comments or social media activity, something he is prone to do. For OpenAI and Anthropic, investors are likely to press them on profitability, valuation, competitive advantages, and the reliability of their products given concerns about AI hallucinations and the industry’s huge capital requirements. While these companies enter the market with a lot of investor enthusiasm, history suggests that successful IPOs depend not only on breakthrough technology and growth prospects, but also on disciplined communication, credible governance, and the ability to withstand intense public scrutiny.
Luxury all-inclusive resorts are becoming more common, signalling a change in travel preferences. As airfare, hotels, and dining costs continue to climb, travellers appear willing to pay a large upfront amount in exchange for certainty and convenience. Searches for all-inclusive vacations are up 70% year-over-year, while occupancy rates at some all-inclusive properties reached 84% in Q1, and bookings through luxury travel agencies have more than doubled. What was once associated with budget vacations has evolved into a luxury segment offering private butlers, fine dining, spa treatments, premium liquor selections, and exclusive experiences. The appeal for travellers revolves around eliminating financial surprises, allowing them to enjoy a vacation without constantly thinking about rising prices, restaurant bills, or additional charges. More pina coladas, fewer calculations.
Diversion: “I have priors!”
