Wall Street Journal

Goldman Sachs' Reflection on the Market's "Brutal Rotation"

The conflict between the US and Iran has suddenly escalated, with hedge funds betting on the rise of Brent crude oil at the fastest pace in nearly a decade—net long positions surged by over 75,000 contracts in a single week, marking the largest increase since 2016. The attack and blockade in the Strait of Hormuz, combined with damage to Russian refining facilities, have tightened global fuel supplies, causing refining profits to soar to historical highs.

Michael Burry, the prototype of "The Big Short," has boldly called for a bullish stance on Hong Kong stocks, stating that now is an "excellent time" to look for cheap assets, and he has quietly increased his holdings in JD.com. The head of Goldman Sachs' Asia capital markets also pointed out that Hong Kong stocks have long entered the AI era, but the lagging index structure has obscured the real vitality. Morgan Stanley has echoed this bullish sentiment. Amid the tug-of-war between bulls and bears, whether the valuation gap and structural opportunities can translate into real returns will test investors' judgment.

On Wednesday, SpaceX's stock price briefly fell to $132 during trading, closing at $136. Analysts pointed out that as the market becomes increasingly cautious about the costs and returns of AI infrastructure, the prospects for xAI's business are being questioned. Meanwhile, SpaceX will release its first quarterly results in the coming weeks, and the lock-up period for its early investors' shares will also expire successively. However, Wall Street remains supportive, with over 80% of analysts giving a "buy" rating and an average target price of $238, implying a 78% upside potential.

ASML's second-quarter performance and full-year guidance both exceeded expectations, and it announced a large-scale expansion plan for 2027-2028 for the first time. Wall Street is collectively optimistic, believing that AI demand will continue to drive investments in EUV equipment and HBM, with profit expectations for 2028 being revised upward, effectively rebutting the "peak memory" theory.

The U.S. military has launched airstrikes against Iran for the third consecutive night and will begin maritime blockades in the Gulf starting at 4 PM Eastern Time on the 14th. Iranian media reported that Iran shot down a U.S. military drone; explosions were heard near the islands of Larak and the southern port of Abbas. Trump stated that the U.S. charges for shipping through the Strait of Hormuz are to compensate for the expenses required to maintain regional security, and related processes and deployments will be initiated immediately. U.S. media reported that Trump's fee request means that each fully loaded supertanker must pay $30 million, while Iran previously charged a maximum of $2 million. Reports indicate that Trump has notified Congress of the renewed outbreak of hostilities with Iran. The International Maritime Organization opposes charging tolls for international navigation through the Strait. Iran's foreign minister stated that the U.S. fee rate is "excessive."

The official CPI shows moderate inflation, but the Michigan Consumer Confidence Index has hit a nearly half-century low, raising concerns about the divergence between the two. Economist Edwards points out that the main issue lies in the CPI using a single "average basket" to obscure the real inflation differences among different income groups—low-income households have long endured higher inflation, which is smoothed out in the aggregate data.

Before the US stock market opens, storage chip stocks are generally down, with Micron Technology falling about 6%, Seagate Technology down about 4%, Western Digital down about 6%, and SanDisk down about 7%. SK Hynix's stock price plummeted by 15.4%, marking the largest drop in history. Gold fell by 1.3%, priced at about $4065 per ounce; silver dropped nearly 3%, priced at about $58.20 per ounce.

Korean brokerage KIS predicts that SK Hynix's Q2 operating profit will reach 60.4 trillion won, a staggering increase of 556% year-on-year, but about 8% lower than the market consensus of 65 trillion won. The core reason is the high proportion of HBM revenue, constrained by long-term contract prices, resulting in an ASP increase lower than the market average. KIS simultaneously lowered its profit expectations for 2026 and 2027 by 9% and 11%, respectively, but maintained a target price of 3.8 million won, stating that the downgrade is merely an LTA adjustment and not a deterioration of fundamentals.

The global financial market appears calm but is fraught with hidden currents: the new chairman of the Federal Reserve, Waller, has reduced forward guidance, amplifying policy uncertainty, while the yen has fallen below the 162 mark, triggering another arbitrage liquidation crisis. UBS's vulnerability index has soared to a high of 0.9, with individual stock volatility exceeding three times that of the index. Amidst a lack of liquidity in the summer, if the 24% high growth expectation for U.S. stocks' second-quarter earnings fails to materialize, it could trigger a severe index-level pullback.