Good morning investors,
After two brutal sessions for the AI trade, all eyes turn to Micron tonight. The company reports after the bell, and it could hardly come at a more charged moment. Memory chips have been the hottest corner of this entire market, taking the baton from the GPU trade and carrying the S&P into record territory, with Micron as the undisputed leader.
Now, after the stock fell 13% on Tuesday amid a global rout in memory names, Micron gets the chance to grab the microphone, open its books, and make its case. Either it gives investors a compelling reason to pause the profit taking, or the print becomes a justification for the bears who say chips are still overbought.
The tape is trying to stabilize this morning. Micron is up nearly 4% in the premarket, SanDisk has bounced 3%, and the memory ETF that cratered 14% yesterday is up about 4%. S&P and Nasdaq futures are modestly higher while Dow futures slip slightly. Overnight, South Korea's Kospi rebounded more than 3% after its near-10% collapse, with Samsung up over 6%. The violent two-way action continues, which is exactly what you get when positioning is this stretched and a make-or-break catalyst looms.
Tuesday's Rout, and What It Actually Was
Let me put yesterday in proper context, because the headline numbers and the underlying story tell two different things. The S&P fell 1.4% and the Nasdaq dropped 2.2% as the memory selloff intensified. Micron, SanDisk, and Marvell all fell more than 9%, following a bloodbath in South Korea where Samsung and SK Hynix each lost roughly 12% and the Kospi triggered multiple trading pauses. The trigger was a report that forecasts for Nvidia's chip platform were drifting lower and that SK Hynix was steering capacity away from high-bandwidth memory and back toward ordinary DRAM. Since HBM is precisely what transformed these companies from commodity makers into mega winners of the AI trade, even a hint of demand softening was enough to make investors question the whole thing.
Here is the part that matters, and it is why I am not panicking. Capital was not fleeing the market so much as rotating within it. While the AI names bled, the boring blue chips turned green. Walmart, Johnson & Johnson, Procter & Gamble, and Merck all finished positive, which is why the Dow fell just 0.1% even as the Nasdaq dropped more than 2%. The same investors who could not get enough AI exposure on the way up turned out to be the first to reach for toothpaste, groceries, and laundry detergent once conditions reversed. Tuesday was a real time snapshot of a market rotation, not a market collapse.
To me, the bears calling the top of the AI trade here will be wrong. Rotations happen in every healthy and long bull market, and the AI demand story is still accelerating regardless of the price action. Zoom out and Tuesday's losses are a blip. Micron is still up well over 200% this year, enjoying a massive boon from data centers whose appetites have been so voracious that Apple is now raising prices. That is not the signature of demand falling off a cliff.
The Bar Is the Enemy Tonight
I have called this Micron's most consequential earnings report in years, and after the past two sessions, that is truer than ever. Analysts expect earnings around $20.83 per share on revenue of roughly $35.75 billion. The numbers will almost certainly be strong. The question, as always with a stock that has run this hard, is whether strong is good enough.
I want to set expectations carefully. Micron has risen the day after earnings only once in its last six reports. The stock closed Tuesday at $1,051 after hitting an all-time high on Monday, and one strategist flagged that even a solid report could see it drift toward $1,000 as it reverts to its 20-day moving average. That would sound like a big drawdown, but it would be technical rather than fundamental.
Remember Jabil and FedEx as templates. FedEx reported a genuine beat on both lines yesterday, with revenue of $25 billion against $24 billion expected and earnings of $6.31 versus $5.96, and the stock still fell 7%. Citi called the decline largely unjustified, attributing it to high expectations and a 75% advance over the past year. That is the environment Micron walks into tonight. The bar is the enemy.
The genuine debate is whether there is fundamental risk emerging beneath the technical exhaustion. As Morgan Stanley's Daniel Skelly noted, we have heard about pricing wars among the model builders, rental prices for older GPUs beginning to decline, and a shift in tone from Microsoft toward lower cost models. These echo the token-economics concerns I raised earlier this week. I do not dismiss them but my honest expectation remains that the earnings growth story holds up for a while yet. The guidance tonight, especially on HBM as a share of DRAM revenue, will tell us whether this memory boom is the structural story I believe it to be or just another cycle waiting to roll over. That is the scoreboard I am watching, not the daily swings.
The SK Hynix Lesson
There is a story behind the memory boom worth telling, because it speaks to why I believe in the durability of this trade. SK Hynix just overtook Samsung to become South Korea's most valuable company, the culmination of a 14-year bet that drew skepticism and scorn before it paid off spectacularly. Back in 2012, SK Group's acquisition of Hynix was considered financially irresponsible, with Samsung valued at more than ten times its size. Eager for an edge, SK Hynix bet on a niche memory type that few data centers used, releasing the world's first HBM product in 2014. It stumbled with the second generation, fell behind, and executives debated halting development entirely. They chose to double down instead, investing heavily ahead of demand from a then-obscure graphics chip company called Nvidia. That facility sat underutilized in 2019 as demand collapsed. The gamble looked like a disaster, right up until it became the foundation of the global AI gold rush.
I tell this story because it is a reminder that the infrastructure underpinning AI was built over more than a decade of patient, contrarian capital allocation. This is not a trade that materialized overnight on hype. The demand is real, the supply took years to build, and that is precisely why I keep insisting this cycle is structural rather than speculative. One soft session, or even one cautious data point about capacity allocation, does not unwind 14 years of genuine technological progress.
Why a Savings Plan Matters More Than Ever
I was reading a piece by Kerry Hannon this morning on 401(k) plans. Her reporting, drawing on new SHRM research, found that even though more than eight in ten employers consider retirement benefits essential to attracting talent, employer 401(k) matches are quietly shrinking. Fewer firms offer a match this year than last, the average maximum match has slipped, and the number of companies permitting 401(k) loans has fallen sharply. At the same time, hardship withdrawals hit a record high, with 6% of participants raiding their accounts last year, often more than once, to avoid foreclosure or cover medical bills.
This is exactly why having a real, deliberate financial plan for your savings matters more than ever. As one planner quoted in the piece put it, the headline about shrinking matches sounds like a crisis, but the deeper problem is that most workers never capture the full match they are already offered. If your match shrinks, the answer is not to panic. It is to raise your own deferral rate to fill the gap, capture every dollar of free money first, and then push a bit further to keep your total savings rate steady. The match is the bonus, not the plan. Markets like the one we are living through this week, with violent swings and scary headlines, are precisely when a disciplined, automated savings strategy proves its worth. You keep contributing through the fear, you let the volatility work in your favor by buying at lower prices, and you do not let a frightening session knock you off a process built around your actual retirement goals. If you have been meaning to put a genuine savings and contribution plan in place, or to make sure you are capturing everything available to you, I would genuinely love to help. It is the kind of foundational work that compounds quietly for decades.
Google Joins the Dow
A notable bit of index news. Alphabet will replace Verizon in the Dow Jones Industrial Average effective Monday, joining mega cap peers Nvidia, Amazon, Apple, and Microsoft in the blue chip average. The move further deepens the Dow's exposure to AI, cloud, and advertising, and it is a fitting capstone to a turbulent week for the stock.
The news comes right as Alphabet just closed its worst single day in more than a year on Monday after two top AI researchers departed, but I will repeat what I said yesterday, because the index inclusion only reinforces it. I believe Google is the leader in AI, and the market is mispricing it. The stock trades at a meaningful discount to Apple on forward earnings despite profits accelerating roughly four times faster, and Google Cloud's backlog nearly doubled last quarter to $462 billion. The company has weathered talent departures for three years and still turned Gemini into a top-three model. Alphabet is up more than 10% in 2026 and on track for its fourth straight winning year. The capex worries are legitimate and worth monitoring, but I would rather own the accelerating compounder at the lower multiple, and the Dow committee evidently sees the long-term importance too.
The Froth in the Plumbing
I want to flag a few signals that reinforce why this pullback was needed, because they speak to genuine excess that had built up. Leveraged ETF assets have exploded to a record $198 billion, up 55% since April, with the 3x leveraged semiconductor fund tripling to $34 billion and the 3x leveraged Nasdaq fund near an all-time high around $40 billion. Momentum as a factor has gone parabolic, with the momentum index outperforming the broad market by the largest quarterly margin on record, surpassing even the 2000 dot-com peak. When leverage and momentum chasing reach these extremes, the market becomes far more vulnerable to exactly the kind of violent two day reversal we just experienced.
This is the froth I have been warning about for weeks, and its unwinding is healthy. It does not signal the end of the bull market. It signals that the most speculative, leveraged corners got ahead of themselves and are now resetting. A market that purges this kind of excess while the underlying earnings keep growing is a market building a more durable foundation, not one breaking down. The leveraged crowd gets hurt in these reversals, but the patient investor with a plan-sized position barely flinches.
Oil Keeps Sliding, and Trump Wants Lower Pump Prices
The energy relief continues unabated. Brent fell to $75.81 this morning, its lowest since February 27, the day before the war began, with WTI down at $72. The risk premium is evaporating as Hormuz traffic slowly resumes. Notably, hedge funds have piled into record net short bets on Brent, more than tripling their bearish positioning over three months, which tells you how thoroughly the market has come to expect lower prices.
President Trump added a populist wrinkle this morning, blasting oil companies for not dropping pump prices in line with the collapse in crude, accusing them of gouging customers and instructing the DOJ to investigate. Whatever you make of the politics, the underlying trend is unambiguously good for the consumer and for inflation. Cheaper energy is the quiet tailwind cushioning everything else, and as I noted yesterday with the e.l.f. Beauty example, there is genuine latent consumer demand waiting to be unlocked as relief filters through to wallets.
Constructive on Gold
I continue to like gold here, and the flows are turning my way. Physical gold ETFs attracted their largest weekly inflow since mid-April last week, reversing four straight weeks of outflows. As I have argued, the recent drawdown looked like a price reset rather than the start of a sustained decline, and with central banks still buying at a record pace and persistent inflation risk in the system, I treat gold as an attractive holding at these levels. It serves the dual role of an inflation hedge and, through the broader precious metals complex, an AI infrastructure play. In a week where the most crowded trades are getting violently repriced, the diversifying value of gold is exactly the kind of thing a well built portfolio is grateful for.
A Note for the Golf Fans
Allow me a brief personal aside, since many of you know I am a serious golf and a former collegiate golfer. The PGA Tour unveiled a new competitive model this week that will begin in 2028, splitting into a premier Championship Series and a Challenger Series with promotion and relegation, much like European soccer leagues. New CEO Brian Rolapp, who will also become commissioner, is framing it around meritocracy and clearer pathways.
I genuinely like the direction, and one element stands out to me personally. We appear to be moving away from the cutless 72-player events, which I have always thought were awful. They completely ruined the spectator experience at the Truist Championship at Quail Hollow near me in Charlotte. A field where everyone plays all four rounds regardless of performance drains the tension that makes the sport compelling to watch. Bringing meritocracy and stakes back to every round should make for a far better product. It is a small thing in the scheme of markets, but as someone who follows the business of golf closely, I think the Tour is making smart moves to improve its product.
Final Thought
I don't know if this is the summer pullback I believe we will get, but we may get more clarity on that tonight with Micron. What we do know though is that the most crowded, most leveraged trade on earth is resetting, the memory names that led the market up are leading it down, and the headlines are loud. Strip away the noise and what you see is a healthy rotation, capital moving from AI into the neglected blue chips rather than fleeing the market, while the underlying AI demand story keeps accelerating.
I am a wealth manager, not a day trader, and my message remains what it has been. The long-term bull is intact. Earnings are growing over 25% this year, oil is falling and cushioning the consumer, and the structural foundations of the AI buildout, built over more than a decade as the SK Hynix story reminds us, remain firmly in place. A 5% to 10% pullback is the normal rhythm of bull markets, and this one is doing exactly what healthy pullbacks do: clearing froth, punishing leverage, and creating better entry points for patient capital. I am watching this with opportunity in mind, not fear.
Everything funnels toward tonight. Micron has the microphone, and the bar is high enough that even a strong report could draw a volatile reaction. But the guidance will tell us whether the memory boom is structural, and my honest expectation is that the growth story holds for a while yet. That is the scoreboard that matters. Stay invested, stay disciplined, and if this week's volatility has you wondering whether your savings and your portfolio are truly built around your goals, that is exactly the conversation I would welcome.
Best regards,
Dan Sheehan [email protected]
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Market Pulse with Dan Sheehan is a personal market commentary newsletter and is independent from my employer. The content is provided for informational and educational purposes only and reflects my views as of the publication date, which may change without notice. Nothing contained herein should be construed as personalized investment, legal, tax, or financial advice, or as a recommendation to buy or sell any security. Any positions discussed represent my own views and may not be suitable for every reader's objectives, financial situation, or risk tolerance. Information is derived from publicly available sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Readers should conduct their own research and consult their own professional advisers before making financial decisions.