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Hello.
Remember how market were excited about US-Iran peace last Friday? Well, they started fighting again over the weekend. But markets are up again today on news that the two countries agreed to halt attacks and meet in Qatar this Tuesday for more talks. The S&P 500 rose 0.5%, the Nasdaq advanced 0.6%, and the Dow gained 0.3% as crude prices pulled back from recent highs. Brent crude slipped below $70 per barrel.
But beneath this relief rally sits Microsoft's $190 billion problem. The company is down more than 20% in June after capex hit $38 billion last quarter, with free cash flow falling 10% year-over-year even as capex surged 63%. Micron briefly surpassed Meta and Tesla in market cap this week after locking in 16 long-term supply agreements, but every dollar hyperscalers pour into AI infrastructure is margin pressure for the companies writing the checks.
Thursday brings the jobs report ahead of the July 4 holiday weekend, with economists expecting 123,000 jobs added in June.
Today:
📰 Market Headlines: Microsoft's AI capex problem, ceasefire lifts markets, Micron bigger than Meta
🤖 AI/Tech: OpenAI limits new models at President Trump's request, Instagram tests algorithm controls
💼 Market Movers: Williams buying Momentum for $5.5 billion, Rackspace cuts 750 jobs
Let’s get started, but first: an opportunity to
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🧠 Microsoft's $190 Billion Capex Problem Is Everyone's Problem
Microsoft is down more than 20% in June, its worst month since December 2000, wiping out over $1.3 trillion in market value and dropping the company behind Nvidia, Apple, and Alphabet. Revenue grew 16-18% for eight straight quarters, and earnings beat estimates every time, but the market stopped caring. The problem isn't what Microsoft earns today; it's what the company has to spend tomorrow.
Capital expenditure hit $38 billion last quarter, and Bank of America projects Microsoft will burn through $190 billion in capex during 2026, building AI data centers. That spending devoured free cash flow, which fell 10% year-over-year even as capex surged 63%. Hyperscaler capex has climbed from 70% of operating cash flow in 2025 to nearly 100% in 2026, leaving almost nothing for buybacks or dividends. Translation: shareholders are funding the AI buildout and getting little in return.
(Hyperscalers = massive tech companies that build and manage hyper-scalable data centers to provide cloud computing, data storage, and network infrastructure.)
The five largest hyperscalers, Amazon, Microsoft, Alphabet, Meta, and Oracle, are projected to spend over $700 billion in 2026. That capital isn't disappearing; it's flowing to the companies building the AI stack. Since January, the semiconductor sector has surged 94% while the Magnificent Seven are down about 6%. Every dollar hyperscalers pour into infrastructure is margin and opportunity for suppliers, and right now, Microsoft is on the wrong side of that trade.
Interestingly, Michael Burry of The Big Short infamy just opened a large bet on Microsoft: he bought long-term options contracts expiring December 2028 with a $700 strike (MSFT is sitting at $372 currently). So at least one person believes in the stock!
Besides Burry, the market is repricing Microsoft not as a software cash machine but as a company sacrificing present returns to compete in an infrastructure arms race where the finish line keeps moving. Whether that bet pays off remains to be seen, but for now, investors have decided the cost is too high and the timeline too uncertain.
📰 Market Headlines
US stocks climbed on Monday as markets rallied on news that the US and Iran agreed to halt attacks ahead of diplomatic talks.
The S&P 500 rose 0.5%, the Nasdaq advanced 0.6%, and the Dow gained 0.3% as investors exhaled following a tense weekend of military strikes.
The US and Iran agreed to pause hostilities ahead of negotiations, according to Bloomberg, after a weekend of escalating attacks that sent energy prices spiking and rattled global markets. The preliminary agreement also includes steps to reopen the Strait of Hormuz, the critical energy chokepoint that handles roughly 20% of global oil supply.
Oil prices pulled back on the ceasefire news. Brent crude slipped below $70 per barrel while West Texas Intermediate dropped toward $68, reversing sharp gains from earlier in the day. Gas prices nationally are hovering around $3.90 per gallon, down from their recent highs, though analysts warn the decline could reignite inflation concerns by stoking consumer demand in an already hot economy.
Micron is suddenly bigger than Meta and Tesla. The memory chipmaker briefly surpassed both companies in market cap on Thursday before settling back to roughly match them on Friday, TechCrunch reported. Micron closed the week at a $1.27 trillion valuation after its stock soared 236% in the past month alone. The Boise-based company has locked in 16 long-term supply agreements with customers, including Nvidia and Anthropic, shielding it from the boom-bust cycles that have historically plagued memory chip makers.
Wall Street is getting nervous about leverage. The same borrowed money that fueled the rally is now raising red flags as volatility picks up and positioning gets crowded, Bloomberg reported. Hedge funds and systematic strategies have piled into stocks at levels not seen since pre-pandemic, creating the risk of forced selling if markets turn.
Nike reports earnings Tuesday in what could be a critical test for the swoosh. Analysts are watching for any signs the company is gaining traction after years of losing market share to upstarts like On Running and Hoka. Nike stock is down roughly 15% year-to-date as investors question whether the brand can recapture its momentum.
The jobs report drops Thursday (not Friday) ahead of the July 4 holiday weekend. Economists expect 123,000 jobs added in June, a slowdown from May's 172,000 gain, with the unemployment rate holding steady at 4.3%. The truncated week also brings a full slate of labor market data, including JOLTS openings, ADP private payrolls, and jobless claims.
🤖 AI/Future/Tech News
OpenAI unveiled GPT-5.6 Sol, Terra, and Luna but limited them to trusted partners at President Trump's request, with broader release in weeks.
Palantir and Nvidia expanded their partnership to deliver sovereign AI for the US government and critical infrastructure agencies.
Commerce cleared Anthropic's Mythos 5 for roughly 100 companies and agencies, but Fable 5 remains blocked.
Russian hackers hit JLR with a cyberattack that halted production for six weeks and cost the UK $2.5 billion, Britain's worst cyber breach.
California's law banning streaming ads louder than video content takes effect July 1, with Illinois following next year.
🚨 Trending on Reddit
Amazon (AMZN) chatter focused on valuation concerns and sector rotation. Users discussed the 16.5% decline in market cap alongside other major tech names, attributing it to persistent inflation and delayed Fed rate cut expectations suppressing high-growth premiums. Some traders remain bullish on Amazon's gaming and robotics positioning post-AI.
NVIDIA (NVDA) conversation remained polarized. Users praised Data Center revenue and AI model dominance, but chatter also turned cautious around valuation and sustainability of market leadership. Some traders question whether competition risks make NVDA a long-term hold at current prices.
🤫 Insider Trading
🚚 Market Movers
Rocket Lab agreed to acquire Iridium Communications in an approximately $8 billion cash-and-stock deal.
Williams (WMB) is in talks to acquire Momentum Midstream for $5.5 billion, expanding its natural gas pipeline network.
Australia's Firmus Technologies will buy 170,000 Nvidia GPUs through early 2028, projecting $30 billion in revenue over six years.
Rackspace (RXT) cut 750 jobs (15% of staff) to pivot to enterprise AI, targeting $75-85 million in annual savings.
Ubisoft (UBSFY) Barcelona employees are striking through July 16 after 51 workers (28% of the studio) lost jobs in a Rainbow Six refocus.
Rivian told R2 buyers their SUVs entered pre-production, with over 1,100 deliveries expected this quarter.
🎙 Make Your Voice Heard
Studies have shown that when a company CEO makes the cover of a major business magazine, the stock often performs worse over the following 12 months. Why?
🎤️ What you said last time
🧠 The Missing (Market) Links
A 29-year-old flight surgeon trainee has $1.2 million invested on $160,000 income, zero student debt, and a $146,000 brokerage his mother started.
Polaroid launched an anti-AI billboard ad campaign to advertise for its Polaroid Go Gen 3 camera.
Existing home sales hit a five-month high at 4.17 million in May, first-time buyers at 35%, their largest share since June 2020.
Whey protein inventories dropped 50% since 2023 as GLP-1 drugs spiked demand, pushing prices to $14 per pound, relief years out.
Fox Sports' US-Australia World Cup match drew 16.2 million viewers, the second most-watched Group Stage telecast in English-language US history.
The median existing-home price hit $429,300 in May, up 1.3% year-over-year, the 35th straight month of gains.
📜 Quote of the Day
The function of the stock market is to permit good businesses to be bought at wonderful prices when they are temporarily unpopular.
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