Good morning investors,
The market reversed from intraday highs on Thursday as software weakness and stalled Iran peace talks weighed on sentiment. The S&P 500 and Dow each fell 0.4%. The Nasdaq dropped 0.9%, its worst daily performance in nearly a month.
But after the close, two developments shifted the picture.
President Trump announced that Israel and Lebanon have agreed to extend their ceasefire by three weeks. And Intel delivered a blowout quarter that sent shares soaring 20% in after-hours trading.
Opening Bell
This morning, futures are mixed. Nasdaq 100 futures have added 0.7% on the Intel surge. S&P 500 futures are near flat. Dow futures have slipped 153 points or 0.3%.
I expect a volatile session today.
The Nasdaq is pointing toward new highs at the open, driven entirely by semiconductor strength. At the same time, oil continues to rise as Iran pushes back against any ceasefire narrative.
This morning, a member of the Iranian Parliament's National Security Commission issued a statement: "We have not accepted the ceasefire and we can take action against their destroyers and we must respond."
That is not the language of de-escalation.
The market is continuing to look past the Iranian conflict, placing its faith in the semiconductor rally and the broader AI trade. Whether that faith is warranted remains to be seen. For now, the divergence between equity optimism and energy market caution persists.
Brent crude rose 2.2% this morning to reach $107.40 per barrel. The Strait of Hormuz remains contested, with both countries seizing commercial ships and Trump ordering the US Navy to "shoot and kill any boat" laying mines in the strait.
Today's economic calendar features the final April reading of the University of Michigan consumer sentiment survey. The preliminary reading came in at a historic low of 47.6, reflecting how deeply the conflict has shaken consumer confidence. Procter & Gamble reports this morning, which will provide insight into consumer behavior amid elevated energy prices.
The Semiconductor Streak Continues
The iShares Semiconductor ETF closed higher Thursday for a 17th consecutive session. That is the longest uninterrupted winning streak for any US semiconductor benchmark since at least 1993.
The prior record was 15 consecutive days in 2014, but that stretch delivered only about 7% in total returns. Since March 31, this 17-day run has produced more than 42%.
Intel has led the charge, gaining more than 62% since the winning streak began, not including its massive 20% rally following last night's earnings beat. Nvidia, despite its $4.8 trillion market cap, has "only" gained 20% over the same period.
Forward earnings revisions for the top holdings in the semiconductor index have moved higher over the past month. The chip names have moved on from both tariff concerns and the Iran conflict. The fundamentals are improving, not just the sentiment.
Intel: Blowout Quarter, Early Signs of a Turn
Intel delivered a major beat, posting one of its strongest quarters in years as signs of a turnaround begin to emerge.
Earnings came in at $0.29 per share versus the $0.01 expected. Revenue of $13.58 billion beat the $12.42 billion consensus and grew 7.2% year over year. After multiple quarters of decline, revenue is now moving higher. That alone marks a change in trajectory for a company that had been losing ground during the early stages of the AI cycle.
Data center led the recovery with revenue growth of 22%, driven by increasing demand for CPUs as AI workloads evolve. The once-sleepy CPU market has taken off as agentic AI workloads shift compute needs beyond the GPUs that have dominated the cycle so far.
Intel's CEO captured the dynamic: "The CPU is reinserting itself as the indispensable foundation of the AI era. This isn't just our wishful thinking, it's what we hear from our customers."
Guidance came in well above expectations. Intel expects second-quarter revenue between $13.8 billion and $14.8 billion, far above the $13.07 billion consensus. Earnings per share guidance of $0.20 more than doubled the $0.09 estimate.
Intel still has work to do. The company continues to post losses, with net losses widening year over year. Yield issues and the challenge of competing with Taiwan Semiconductor remain front and center. But the direction is improving. New products are ramping, partnerships are forming, and demand is returning.
This is still early. But it is no longer just a turnaround story without traction.
My Positioning Has Worked
I came into the year with AMD and Taiwan Semiconductor as two of my top stock picks. I have written about both throughout these newsletters.
AMD is now up 22% on the year. Taiwan Semiconductor is up 39%.
The same voices that were dismissing the AI trade a few weeks ago are suddenly perma-bulls again. This is the nature of markets. Sentiment swings from one extreme to another, often faster than fundamentals change.
I have consistently said that doubting the impact AI will have on the market and the world is a mistake. The infrastructure buildout is real. The demand is real. The earnings are real. The companies controlling the compute layer are generating extraordinary profits and seeing that reflected in their valuations.
Taiwan Semiconductor hit another all-time high on Friday after the island's regulator announced plans to loosen limits on how much funds can allocate to single stocks. Under the new framework, domestic equity funds can allocate up to 25% to any company with a weighting above 10% on the Taiwan Stock Exchange. That directly benefits TSMC, which has been constrained by the previous 10% cap.
AI-related stocks now represent a record 45% of the S&P 500's market capitalization, up 20 percentage points since ChatGPT launched in November 2022. A record 15.4% of investment-grade debt is now tied to AI, making it the largest sector in the US credit market. AI-linked debt has nearly doubled to an all-time high of $1.4 trillion.
This is not a bubble in the traditional sense. The fundamentals are supporting the valuations. Earnings growth in the semiconductor sector is running at extraordinary levels. The question is sustainability, not existence.
Software Continues to Struggle
Thursday illustrated the bifurcation within technology that has defined 2026.
Semiconductors surged. Software stumbled. ServiceNow fell 13% after its results. IBM dropped 6%. Texas Instruments, meanwhile, had its biggest day since the dot-com era.
The software trade has been weighed down by fears that AI-native tools will displace traditional software functions. When models can simply perform tasks that previously required specialized applications, the value of those applications diminishes.
This is a real concern for certain segments of the software market, but it is not a universal threat. Companies with deep workflow integration, mission-critical applications, and strong customer lock-in will navigate this transition better than commodity software providers.
The semiconductor/software divergence creates an interesting dynamic. The companies enabling AI are being rewarded. The companies potentially disrupted by AI are being punished. That is a rational market response, even if the magnitude of moves seems extreme.
IPO Pipeline Awaits Resolution
Blackstone's president noted Thursday that the IPO market is waiting for geopolitical clarity.
"Once this war resolves, I do think we'll see an acceleration," he said, pointing to AI as a key driver.
Before the conflict disrupted capital markets, 2026 was trending well ahead of 2025 for new listings. Jersey Mike's and Liftoff are moving toward public markets.
But the real anticipation centers on the mega-private companies: OpenAI, Anthropic, and SpaceX. When those names finally come to public markets, retail investors will gain direct access to some of the largest and most consequential technology companies anywhere.
The SpaceX IPO in particular could be historic. The merged SpaceX/xAI entity is targeting a valuation that would make it one of the largest public offerings ever. The retail allocation is reportedly targeting 30% or more, which would give individual investors meaningful access.
Final Thought
The market leadership has narrowed dramatically. Semiconductors are carrying the entire rally. Strip out the chip names and the gains thin considerably.
That concentration creates both opportunity and risk. The opportunity is that the AI infrastructure buildout is real and the companies benefiting have genuine earnings power. The risk is that any stumble in the semiconductor complex would have outsized impact on the broader market.
For now, the trend remains higher. The semiconductor winning streak continues. Earnings are beating. And despite the geopolitical noise, the market is choosing to focus on corporate fundamentals.
I remain bullish on the year but continue to believe some consolidation would be healthy after the magnitude of the recent rally. Use any pullbacks to add to quality positions in the companies driving this cycle.
Stay disciplined. The playbook continues to work.
As always, feel free to reach out with questions about navigating this environment.
Best regards,
Dan Sheehan [email protected]
Subscribe: https://substack.com/@dansheehan3
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.