Good morning, investors. Stocks are coming off a winning session thanks to optimism around US-Iran peace talks, but actual progress remain up in the air depending on the source of the information.

We’ll have more reporting on this as it happens.

In today’s edition, we’re turning our attention to what’s been one of the strongest corners of the market over the last year.

Wall Street just sold off memory stocks on news that should make memory demand surge.

Google announced TurboQuant, a memory compression tool that shrinks the memory required to run an AI model by a significant amount.

The market’s reaction suggests investors believe this will mean less demand for memory. That, however, conflates efficiency with contraction.

Still, the sell-off swept through the entire sector.

To be clear, TurboQuant compresses how much memory each individual model uses. It doesn’t drag on total demand.

In fact, it makes AI inference cheaper to deploy at scale, which should open the door to faster deployment and greater demand over time.

More models running simultaneously means more aggregate memory consumed, not less.

The semiconductor industry has already seen this playbook.

Just look at Nvidia — more efficient chips did not shrink chip demand. Rather, the company’s world-class chips have made semiconductors affordable enough to embed in everything.

Demand has gone parabolic.

While the market seemed to fixate on memory per model coming down, the more relevant, long-term detail is total models deployed.

Google’s new tool pushes that number up.

Micron has dropped 10% over the last five days, but it remains up 21% year-to-date.

The iShares South Korea ETF (EWY), which is heavily weighted to Samsung and SK Hynix, is similarly up 24% year-to-date.

In other words, investors have bet big on memory for months but suddenly, with a bullish tool hitting the market, that changed.

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🇺🇸 US-Iran talks remain up in the air. Iran would reportedly reject a ceasefire offer and it has laid out its own conditions for ending the war, while the US has reportedly sent a separate 15-point plan as part of indirect talks. (CNBC)

🚀 Arm surged 16% on Wednesday after unveiling its first in-house AGI central processing unit for AI data centers. Meta is the debut customer, and executives project the chip line will generate $15 billion in annual revenue by fiscal year 2031. (Yahoo Finance)

📊 Recession odds are spiking on Wall Street. Moody's Analytics puts the probability of a downturn within 12 months at 49%, Goldman Sachs is at 30%, Wilmington Trust at 45% and EY Parthenon at 40%. (CNBC)

📈 US import prices posted biggest jump in 4 years. Rising energy prices from the Middle East conflict sent core import prices up 3.0% year-over-year, with part of that surge stemming from dollar weakness. (Reuters)

🗓 March 26, 2020: The Dow surged 6% to cap a three-day rally that was the largest since 1931, with Congress moving toward passing a $2.2 trillion stimulus package. The bounce came just weeks after markets entered the quickest bear market on record.

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