AI volatility trading rose sharply, but oil kept Wall Street on edge last week
Wall Street’s record-setting start to the week hit two common sources of volatility: artificial intelligence trading and oil. The Dow Jones Industrial Average on Monday closed above 53,000 for the first time before renewed US-Iran tensions erased those gains, leaving the blue-chip index down 0.5% for the week. Chip stocks – and the hottest corner of the market – are also highly volatile as investors continue to question whether AI trading has been overextended. Still, the tech-heavy Nasdaq gained 1.74% for the week, while the S&P 500 rose 1.23%. Both indexes have finished higher in four of the past five weeks. Here’s a closer look at what drove the market last week. Chip stocks take investors for a ride Semiconductor stocks remain at the center of market action. The group started the week strong, with the VanEck Semiconductor ETF rising nearly 2% on Monday as investors bought into some of the biggest winners from the first half of the year. But the rally quickly faded on Tuesday after Samsung’s results failed to impress investors and Reuters reported that China’s DeepSeek was developing its own AI chip. Micron, an Idaho-based rival to Samsung, fell 4.7%, while the VanEck Semiconductor ETF fell about 4%. Semiconductor trading was steady on Wednesday, helped by Apple’s announcement that it is extending its long-term partnership with Broadcom in a multi-year deal expected to exceed $30 billion. Apple has historically tapped Broadcom for communication chips that help its devices connect to cellular, WiFi and Bluetooth networks. The new deal calls for the production of more than 15 billion US-made chips and includes a $1.5 billion expansion of Broadcom’s manufacturing facility in Fort Collins, Colorado. Broadcom shares rose nearly 5% on the news Wednesday. It was the second Apple-Broadcom headline of the week. On Monday, Broadcom said in a securities filing that it has agreed to provide Apple with “a range of ASIC silicon products for use in multiple generations of Apple products.” ASIC is short for integrated circuit for a specific application – and that jibes with Bloomberg News reported that Broadcom is working Apple on a special AI server chip for its data centers. That would be similar to Broadcom’s design relationship with Google for its internal tensor processing units (TPUs). Broadcom was our second best performer last week, up 10%. Amid this volatility, we used Wednesday’s rally in AI and semiconductor stocks to exit our remaining position in Arm Holdings, netting a nearly 69% return on shares purchased in April. While we don’t believe AI buildout is nearing a peak, trading has been volatile in recent weeks, and we didn’t want to risk giving back a nice profit in a volatile stock. We also wanted to reduce portfolio overlap with the CPU refresh theme, provided by our recent Intel acquisition. We’ll continue to follow Arm from the bullpen and could be interested again at a more attractive valuation. We still like Intel, with portfolio manager Jeff Marks noting on Friday that we would have bought more shares if not for our trading restrictions. Chip stocks continued to rally on Thursday, once again emerging as some of the market’s best performers. The VanEck Semiconductor ETF rose 2.5%, led by a 4.5% jump in Micron and a 7.6% gain in Sandisk. However, Friday’s action in the group was somewhat muted as investors eyed the much-anticipated SK Hynix in the US market. Jim Cramer warned that SK Hynix’s startup could prompt investors to sell some stocks to free up cash for a new offering. The South Korean memory leader, which has risen this year on growing demand for AI-related memory, opened at $170 — about 14% above its offering price of $149. One bright spot in Friday’s chip action: Nvidia rose 4% to end the day at $210.96 a share, its highest close in nearly a month. Meta starts showing its AI hand Meta Platforms has spent the week trying to answer the big question hanging over its stock : how will the company turn its big AI investment into a meaningful return? By the end of Friday, the market had given approval to the appeal. The parent of Facebook and Instagram laid the groundwork on July 1 by confirming that it is preparing to launch a cloud business that will sell more computing power to foreign customers. The move will put the company in competition with Amazon Web Services, Microsoft Azure, and Alphabet’s Google Cloud, as well as smaller neoclouds called CoreWeave and Elon Musk’s SpaceX. Jim has been ramping up his calls for Meta to start a cloud business, correctly predicting that the struggling stock will rise in response. Last week, Meta provided more evidence of how it plans to monetize its computing investment. On Tuesday, the company launched Muse Image, an AI generation model aimed at attracting creatives and marketers. The technology will power new tools through Meta’s Advantage Plus advertising platform, which allows brands to improve ad creativity in their marketing campaigns and automate certain tasks. Then on Thursday, Meta introduced Muse Spark 1.1, calling it “its most robust model yet for coding and agent AI functions.” The company said it will charge developers for access to the technology, a significant shift for a company that has previously emphasized providing its AI models through open-source releases. This move puts Meta in direct competition with OpenAI’s Codex and Anthropic’s Claude Code. Meta is rapidly expanding the infrastructure needed to support those ambitions. Reuters reported on Thursday that the company plans to start producing its own custom AI chip in September as it looks to double its computing capacity next year. The chip, designed in collaboration with Broadcom and manufactured by Taiwan Semiconductor Manufacturing Co., could help Meta reduce its capital expenditures and reduce its reliance on Nvidia and AMD. The Meta saved its best for last, rising 6% in Friday’s session. CEO Mark Zuckerberg’s comments in an interview with Bloomberg News contributed to this. “The offerings you get from computing are so high that it might make sense, in some cases, to lease or consider those kinds of deals instead of your own internal use,” Zuckerberg told Bloomberg. Meta shares opened Monday lower, before buyers moved in – a harbinger for the rest of the week. The stock finished in the green for all but Wednesday’s session. For the week, Meta jumped 15%, making it the Club’s best performing stock. Oil threatens to destroy the market rally … and the Iran War returned to the door of Wall Street last week, showing the weakness of the temporary peace agreement between Washington and Tehran. Crude prices fell on Tuesday after Iran attacked a Qatari natural gas tanker near the Strait of Hormuz, rekindling concerns about disruptions to one of the world’s most important energy export routes. The pressure intensified on Wednesday after President Donald Trump said the war against Iran was “over” and the US military continued to strike 90 Iranian military targets, including air defense systems. Energy stocks – including ConocoPhillips, Chevron, and Marathon Petroleum – rallied on Tuesday as WTI crude rose to $76 a barrel, while companies exposed to higher fuel costs came under pressure. Holdings group Honeywell Aerospace finished as our worst-performing stock for the week, as investors worried that higher oil prices and renewed wars in the Middle East could dampen demand for air travel. That’s especially important because airline suppliers generate a large portion of their revenue from aftermarket services and maintenance — business that tends to decline when planes fly fewer miles. Honeywell Aerospace’s recent strong performance following its June exit may also invite some profit-taking. We added to our HONA position on Tuesday. The rate jump also reignited inflation concerns, pushing the 10-year Treasury yield to its highest level since May. The sharp drop in oil prices in recent weeks has led the market to discount the prospect of more rate cuts by the Federal Reserve later this year. However, a continued rise in crude and, by extension, energy-driven inflation, could put that back on the table. Rising bond yields are hurting shares of Club Hold Home Depot, which it holds as a play on the rebound in the US housing market. In the meantime, high borrowing costs continue to weigh on the housing market, delaying the acquisition of home improvement costs that would benefit the company. DuPont also lagged as investors weighed the impact higher energy prices and renewed tensions in the Middle East could have on its input costs and business in the region. DuPont’s water division does a lot of business in the Middle East. On Friday, pressure eased as oil prices eased after Trump said Iran had called for a deal and the two sides would continue talks. (See here for a full list of stocks from Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. 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