Susannah Streeter, Chief Investment Strategist, Wealth Club: ''Investors are largely shrugging off the escalation of the Middle East conflict and focusing instead on the solid earnings being posted in the United States, as the world's largest economy shows resilience amid the huge sums being poured into the AI build-out.
The Footsie looks set to end the week on a slightly more optimistic footing, with futures markets pointing to a gently positive start to trading. Worries about fresh supply chain snarls as traffic through the Strait of Hormuz slows to a trickle are largely being batted away. Brent crude is trading around $76 a barrel, slightly higher than yesterday but down from above $80 earlier this week. There appears to be an expectation that some kind of deal will be struck, and that these setbacks are now to be expected as regional powers continue to jostle for domination.
Stocks in Asia staged a rebound, coming off the back of a fresh surge in the S&P 500, with the rally broadening beyond the mega-cap technology stocks that have dominated gains for much of the year.
Gains are increasingly being concentrated in sectors considered to be the secondary beneficiaries of the AI investment wave, with industrial companies providing the construction might for new facilities and banks financing the build-out of data centres and power infrastructure. The surge in IPO and dealmaking activity also presents a significant opportunity for investment banks and advisory firms.
The FOMO effect remains strong, with retail investors fearful of missing out on buying into the current stars of the AI show. Memory chip maker SK Hynix is in the spotlight as it is set to start trading on the Nasdaq, with its American depositary receipts reportedly seven times oversubscribed. The South Korean company wanted to benefit from the appetite for AI among US investors, and it seems it won't be disappointed. Even though the stock has already risen by around 660% over the past year, soaring on voracious demand for its high-bandwidth memory chips, plenty of investors are still desperate to get a slice of the company.
However, the stock is likely to be hit by bouts of volatility in the days and weeks to come, given that semiconductor shares have been so sensitive recently to shifts in sentiment. Given the super-high valuations the sector is enjoying, any hint that demand is starting to moderate can trigger sharp swings. While companies right now can't get enough of SK Hynix's products, there are concerns that a lot of this demand has been front-loaded and will ultimately prove cyclical, as investor attention gradually shifts from the companies building the AI revolution to those finding the most profitable ways to use it.''
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