Market Context
The week of Monday 22 to Friday 26 June 2026 marked the first time the AI trade turned visibly against itself. The post-peace optimism that drove records the prior week gave way to a sharp, tech-led selloff as investors confronted an uncomfortable question: if memory chips are becoming scarce and expensive, who pays? The answer arrived on Thursday when Apple and Microsoft both announced consumer hardware price increases, citing a memory shortage driven by AI data centre demand. The Nasdaq Composite posted its fifth consecutive losing session on Friday, closing down 0.24% at 25,297.62, while the S&P 500 ticked down 0.05% to 7,354.02 and the Dow shed 44.51 points to 51,876.11. The S&P 500 slid nearly 2% on the week, the Nasdaq fell 4.6%, while the Dow outperformed with a 0.6% weekly gain. The rotation out of expensive technology and into industrials, healthcare, and financials was the defining feature of the week.
Key Signals
Micron delivered a blowout quarter, confirming the memory supercycle. Micron posted record revenue of $41.46 billion and adjusted earnings of $25.11 per share, well above the $20.78 expected, after the close on Wednesday. The stock surged 15.74% as both results and guidance significantly beat expectations, signalling that AI memory demand will remain tight. The result reinforced that the constraint in the AI buildout has shifted from compute to memory, and that pricing power now sits with the memory makers.
The same memory shortage became a cost crisis for everyone downstream. Apple fell 6.12% on Thursday after announcing price hikes across multiple Mac and iPad products, citing the global memory chip shortage. The contrast with Micron's surge was stark, illustrating that AI data centres are driving up upstream chip prices while squeezing downstream consumer electronics manufacturers. Analysts now expect these high costs to persist through 2027 and perhaps into 2028, driven by data centre demand and Nvidia's rapid introduction of updated AI chips, with each new cycle requiring more memory.
The hyperscaler cost squeeze opened a wedge in the tech sector. A growing divide emerged this year between memory chip names like Micron and hyperscaler stocks like Microsoft, Amazon, and Alphabet. The latter three spend heavily on chips and face rising costs as they grow their AI data centres. Microsoft itself fell 3.23% on Thursday after announcing its own hardware price increases. The market is beginning to price the reality that the AI buildout enriches the suppliers of scarce inputs while pressuring the margins of those who must buy them.
PCE inflation hit a three-year high but came in line with expectations. May headline PCE rose 0.4% on the month and 4.1% annually, the highest since April 2023, while core PCE gained 0.3% monthly and 3.4% annually. Both were in line with economists’ expectations. While core inflation reached its highest level since October 2023, investors were relieved the numbers were not even higher given rising energy prices, and Treasury yields edged lower. The market read an in-line print, rather than an upside surprise, as a modest relief.
An OpenAI IPO delay raised questions about AI infrastructure financing. Chip stocks weakened further on a report that OpenAI is considering delaying its IPO to next year, partly because of SpaceX's poor performance following its debut and broader volatility in AI shares. JPMorgan noted the report raised concerns about the sustainability of AI infrastructure spending, given the delay in funding from the capital markets. The financing question is now a genuine variable for the AI capex thesis.
Stock Market Performance & Other Assets
Equities
The week's internal rotation was its defining characteristic. On Thursday, the Dow rose 0.14% to 51,920.62, buoyed by Caterpillar (+5.81%) and UnitedHealth (+2.65%), while the Nasdaq fell on a 6% drop in Apple. Six of eleven S&P sectors rose, led by industrials, healthcare, and materials. The breadth signal was constructive even as the headline indices fell. Advancing shares outnumbered declining ones through the week, suggesting investors were rotating into sectors beyond tech rather than exiting equities outright. Asian markets bore the brunt of the tech selloff, with the Nikkei 225 falling 4.2% and the Kospi dropping 7.8% on Friday.
Commodities
WTI crude fell more than 4% to trade near $70 per barrel, its lowest level since early March, as progress toward reopening the Strait of Hormuz eased supply concerns and began to bring relief at the pump. The continued collapse in oil is the single most important disinflationary force now working through the system. Gold rose around 1.1% to roughly $4,092 per ounce on the heels of the in-line PCE report, which revealed a smaller-than-expected monthly increase and lifted the appeal of yield-less assets.
Fixed Income & Crypto
The 10-year Treasury yield fell to around 4.41% as moderating inflation expectations relieved pressure on rates. Even so, markets are pricing an 80% chance of a rate hike in December following the prior week's hawkish pause, with the probability of a September increase at around 63%. The crypto market remained under pressure, tracking the risk-off rotation in equities and the broader concern over AI infrastructure financing following the OpenAI IPO report.
Market Movers & Shakers
This week exposed the most important structural development in the AI trade since it began: the emergence of clear winners and losers within the theme itself. Micron and the memory complex are capturing pricing power. Apple, Microsoft, and the hyperscalers are absorbing the cost. The rotation into industrials and healthcare, led by Caterpillar and UnitedHealth, shows institutional capital seeking shelter in cheaper, less AI-exposed corners of the market. The buy signals now favour the suppliers of scarce inputs and the beneficiaries of falling oil, while the names that must buy memory at any price face a margin headwind that analysts expect to persist for years.
One Insight
This week revealed the next phase of the AI investment cycle, and it is more complicated than the simple "buildout" narrative that has driven markets for the past year. The story is no longer that AI capex lifts everything connected to it. The story now is about where in the supply chain the value accrues, and this week made clear that it is accruing to the owners of scarce inputs rather than to the companies that must assemble them into finished products. Good news for Micron is not necessarily great news for tech in general. Micron and its competitors keep improving their results thanks to the rising cost of the memory chips used in products from phones to laptops to automobiles. That sentence captures the entire week. The same force that sent Micron up 16% sent Apple down 6%.
The constructive reading is in the market's internal behaviour. Despite the headline declines, breadth improved through the week, with advancing stocks outnumbering decliners as capital rotated into industrials, healthcare, and financials. This rotation suggests investors are moving money into sectors beyond tech, a potentially healthy development even as mega caps lose ground on worries about spiralling AI costs. A market that broadens beyond a handful of names is structurally healthier than one that depends on them. The cautionary reading is the financing question. The reported OpenAI IPO delay raised concerns about the sustainability of AI infrastructure spending, given the delay in funding from the capital markets. If the capital that funds the buildout becomes harder to raise, the pace of the buildout slows, and the memory pricing power that looks so attractive today becomes more cyclical than structural. The week ended with oil near $70 and inflation expectations easing, which gives the Fed room. The open question for the second half is whether the AI trade can rotate internally without unwinding entirely.
What We’re Watching (next 7–14 days)
June non-farm payrolls (July 2): The market closes Friday, July 3, for the Independence Day holiday, with investors awaiting the jobs report to inform their economic outlook. After May's strong 172,000 print and the hawkish Fed pause, the June reading will shape expectations for September and December rate hikes.
Oil's path toward $70 and below: WTI fell near $70 as the Strait of Hormuz reopening progressed. However, the administration has directed the Department of Justice to review why gasoline prices have not declined further. A sustained move lower would cement the disinflation narrative and ease pressure on the Fed.
The Apple-Microsoft pricing read-through: Whether other consumer hardware makers follow with price increases will signal how broadly the memory shortage is feeding into consumer inflation, and whether it begins to dampen demand heading into the second half.
Alphabet's entry into the Dow: Alphabet is set to replace Verizon in the Dow Jones Industrial Average, effective before the market opens on June 29. The reconstitution increases the index's technology weighting and its sensitivity to AI-sector sentiment.
Next week's major earnings:
The week is shortened by the Independence Day holiday, with markets closed on Friday, July 3. The corporate calendar is light, leaving the June jobs report on Thursday, July 2, as the dominant event. A small number of reporters and the start of pre-announcements ahead of the Q2 earnings season, which begins in earnest in mid-July with the major banks, will set the early tone for how the post-conflict, disinflating macro backdrop is feeding into corporate guidance.
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