In the United States, equity markets recorded new all-time highs last week, spurred by hopes of an end to the conflict with Iran and continued optimism surrounding artificial intelligence (AI). Reports of an agreement between the US and Iran on Thursday, expected to last for 60 days, helped propel the S&P 500 and NASDAQ to record highs. Goldman Sachs raised its forecast for the S&P 500 from 7,600 to 8,000, reflecting the increasingly positive sentiment emanating from US markets following a difficult start to the year. This implies approximately 6% upside from the index’s current level. The bank stated that the upgrade would be driven by AI-related companies and that ongoing infrastructure investment would help offset potential inflation concerns and weaker consumer spending. Much of the week’s gains were driven by semiconductor stocks, which have enjoyed their strongest start to a year since the dot-com boom of the late 1990s. The Philadelphia Semiconductor Index, which tracks 30 of the largest US chipmakers, has gained 75% year-to-date (YTD), its best performance since 1999, and has added more than $5tn in market capitalisation. For the week, the S&P 500 and NASDAQ closed 1.22% and 2.01% higher, respectively.
Turning to earnings, with the majority of reporting season now complete, it was another positive quarter for US corporates. Despite the conflict in the Middle East, companies broadly reported strong earnings growth, with the Magnificent Seven once again leading the way. After several quarters of more balanced earnings growth between the Magnificent Seven and the broader S&P 493, the latest quarter saw earnings growth among the Magnificent Seven reach 63.2%, the highest since Q2 2021. Meanwhile, the S&P 493 recorded earnings growth of 17.4%, based on companies that had reported by 21 May, representing the strongest growth since Q4 2021. In terms of earnings announcements last week, Dell Technologies raised its fiscal-year outlook on Thursday after reporting an 88% increase in sales, underscoring the scale of demand for AI servers. Snowflake surged by its largest margin since 2020 after raising full-year sales guidance and pointing to accelerating AI workloads. The company also announced a $6bn agreement with Amazon that will allow Snowflake to access Amazon Graviton chips over a five-year period. In addition, Snowflake raised its annual revenue forecast, while at least 25 analysts increased their median price target for the company to $275.
In technology, IREN, a data centre operator in which NVIDIA recently announced a $2.1bn investment, revealed plans to purchase $1.6bn worth of Blackwell systems from Dell in an effort to meet soaring demand for computing capacity. The systems utilise NVIDIA’s Blackwell architecture, while Dell designs and builds the surrounding infrastructure, effectively constructing the server systems that underpin AI development. Dell can reportedly build, test and ship these server racks within 24 hours. This transaction is another example of the highly interconnected nature of the AI ecosystem, where a relatively small number of companies control much of the supply chain. Elsewhere, Anthropic, the company behind the Claude AI chatbot, announced that it had raised $65bn at a valuation of $965bn. This places Anthropic ahead of its chief rival, OpenAI, whose previous funding round valued the company at $852bn. The new valuation is more than double its level in February, highlighting the meteoric rise of Anthropic and the growing adoption of its Claude platform and broader AI product suite.
In Europe, equity markets traded close to record highs at the start of the week, with both the Euro Stoxx 50 and STOXX Europe 600 rising by more than 1% on Monday. Performance was mixed through the middle of the week as investors closely monitored developments in the Middle East. News of a potential agreement on Thursday helped alleviate some concerns, and while markets did tick up slightly on Friday, for the week, the Euro Stoxx 50 and STOXX Europe 600 closed lower, down -0.18% and -0.28% respectively.
In corporate developments, Ferrari, one of the world’s most famous car manufacturers, launched its first fully electric vehicle last week. The launch marks the first significant step by the company, renowned for its emotive engines and distinctive design, into the electric vehicle market. The Luce will be a four-door saloon capable of reaching a top speed of 310km/h (193mph) and will feature an interior designed by a former Apple designer. While the vehicle is not expected to be a major volume seller, it serves as a statement to Chinese manufacturers, who currently dominate the electric sports car segment, that Europe’s legacy brands remain capable of competing for market share. The Luce will retail for approximately €500,000, with deliveries expected to begin in October.
In the United Kingdom, the FTSE 100 declined slightly last week as shifting sentiment surrounding developments in the Middle East weighed on investor confidence. Despite a strong start to the week, reports of US and Iranian airstrikes on Thursday pushed the market lower, with the index falling 0.7% during the session. The FTSE 100 recovered much of those losses on Friday and ultimately finished the week -0.62% lower.
In corporate developments, Amazon invested £20bn in the UK last year as part of a broader three-year investment programme running until the end of 2027. By that point, the company aims to have invested a total of £40bn in the country. The investment programme includes new operational facilities as well as expansion of its studio business. Amazon currently employs approximately 75,000 people in the UK, with revenues exceeding £30bn.
