When the chips are down and up and down

• Semiconductor stocks faced sharp selloffs with Korea's KOSPI sliding nearly 10% and the SOX chip index down 8%, despite initially positive earnings from Micron Technology
• Apple announced price increases for iPads and MacBooks due to surging memory and storage chip costs, highlighting a downside of the AI spending boom
• UK Prime Minister Keir Starmer resigned after months of pressure, marking Britain's seventh prime minister in a decade, though markets took the news in stride

Market Summary: Tech Volatility and Global Developments

Tech Sector Turbulence

Global technology stocks experienced significant volatility this week, with major selloffs in AI and semiconductor sectors. The SOX chip index declined 8%, while Korea's KOSPI dropped nearly 10% on Tuesday. Despite initial optimism following Micron Technology's strong quarterly results on Wednesday, sentiment reversed Thursday when Apple announced price increases for iPads and MacBooks due to surging memory and storage chip costs. This triggered renewed selling in Asian markets Friday.

Key Market Debate

Investors remain divided on whether AI-related exuberance has become excessive. SoftBank's Masayoshi Son dismissed bubble concerns, while several Wall Street firms are raising S&P year-end forecasts. New Fed Chair Kevin Warsh appears unlikely to target asset bubbles explicitly, though his reduction in Fed communication—including eliminating forward guidance—may increase market volatility.

UK Political Uncertainty

Prime Minister Keir Starmer resigned Monday after mounting pressure, marking Britain's seventh prime minister in a decade. Labour's Andy Burnham is likely successor, potentially taking office next month. UK markets showed resilience initially, but concerns persist about tepid productivity growth and welfare costs. Energy policy, particularly North Sea oil and gas, remains a critical agenda item.

Energy and Inflation Data

Oil prices tumbled throughout the week despite Iranian conflict tensions, as traders bet on normalization. The U.S. PCE index rose 4.1% year-over-year in May (first time exceeding 4% in three years), with core PCE at 3.4%—both meeting expectations. Markets price 80% probability of a Fed rate hike in September.

Currency Markets

The dollar strengthened to one-year highs, with the yen languishing near 40-year lows past 160 per dollar, though Japanese authorities haven't intervened.