Good morning, investors. Another day, another record high for the stock market.

The bull case makes itself at this point. Just look at the parabolic returns for semiconductor stocks the last four weeks.

For us, that means it’s more important than ever to stay on top of what could go wrong.

The S&P 500 closed above 7,300 for the first time on Wednesday.

The eye-watering stock rally rests on two assumptions that investors are treating as settled fact — that the Iran conflict is nearly over and that AI demand is nowhere close to peaking.

And semiconductors have led the way the last 4 weeks:

That sweep tells you which assumption is doing the heavy lifting. It also captures just how much enthusiasm is behind the AI trade right now.

For context, before the launch of ChatGPT, the market cap of semiconductor stocks accounted for roughly 6% of the total size of the S&P 500.

This week, that number is now above 22%, according to data from Bespoke Investment Group.

Indeed, hyperscalers are forecasted to spend more than $700 billion on AI infrastructure this year, nearly triple their 2024 outlay.

Meanwhile, the Iran side remains a more delicate variable.

None of that, however, has showed up in earnings, a fact that’s allowed bulls to shrug off geopolitics entirely this year.

Data in mind, an optimist like myself could easily argue that complacency in this case is rational and self-reinforcing.

Earnings are improving, the labor market hasn’t collapsed on itself, and some investors continue to hold out for rate cuts from the Fed.

But any hesitation from Big Tech on AI spending or confirmation that the Iran conflict will drag on longer could undermine that view in an instant.

Staying on top of markets that hit a new all-time high seemingly every week, a never-ending news cycle and volatility that’s frankly...volatile is a lot of work.

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🛢The US and Iran could be nearing a peace deal. While mixed reports continue to emerge, President Trump said Wednesday that “great progress” was made toward a final agreement, though bombs would hit Iran “at a much higher level” if there’s no deal. (CNBC)

📈 AMD stock rallied double digits after its strong earnings beat. In the first quarter, the stock beat all estimates on top and bottom lines, reporting revenue of $10.25 billion. Shares climbed more than 17% on the day. (Yahoo Finance)

📊 The Fed has to monitor the AI boom closely. That’s what Chicago Fed President Goolsbee said: “If it's as good ⁠as advertised, it would be lovely…but if that's still to come in the future, I do think we need to be ‌a little more ​circumspect and ​on ​the lookout for ‌overheating.” (Reuters)

I sat down with David Dziekanski, CEO of Quantify Funds, to unpack bitcoin’s latest rally, the bull market in gold, how Japan’s bond market impacts hard assets, and the “new normal” of the debasement trade.

Tune in Spotify, Apple Podcasts, or YouTube.

(If you can take 30 seconds to leave a review on the show, please do!)

🗓 May 7, 1915: A German U-boat sank the Lusitania off the coast of Ireland, killing nearly 1,200 people including 123 Americans. The Dow Jones Industrial Average fell 4.5% the same day.

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