Technology giant earnings report eve: US stocks enter "wait-and-see mode", oil prices and AI both faced with uncertainty.

As global investors hold their breath in anticipation of the financial reports of tech giants, the US stock market is facing a double whammy of political risks from GEO Group Inc and a revaluation of AI valuations. Seeking Alpha analyst Damir Tokic pointed out that the current market is dominated by two major themes - inflation shocks driven by oil prices and AI trading, with tech stocks staying cautiously in a "wait-and-see mode" ahead of key financial reports. "Currently, the tech sector is in a wait-and-see mode, while other sectors are experiencing sell-offs," Tokic said. "Under the dual pressure of rising oil prices and approaching tech financial reports, the S&P 500 index faces undeniable downside risks." Oil prices surpassing $90, inflation shadows loom once again The rapidly escalating situation in the Middle East has become the biggest variable in the market this week. The US military launched attacks on Iran for the tenth consecutive night, while Iran retaliated by striking multiple US military bases. The shipping in the Strait of Hormuz has been significantly affected - data showed that only a few ships passed through the strait last Sunday. Iran has announced the closure of the Strait of Hormuz again, while the US has simultaneously resumed naval blockades against Iran. Supply risks have driven international oil prices to soar significantly. On July 17, WTI futures prices closed at $82.5 per barrel, Brent crude futures closed at $88.1 per barrel, rising by 18.7% and 20.8% respectively compared to the end of June. By July 20, Brent crude even briefly surpassed $91 per barrel. The continuous rise in oil prices has reignited concerns about inflation and rate hikes in the market. Shane Oliver, Chief Investment Strategist at AMP, warned that if the closure of the Strait of Hormuz continues and the war escalates further, "oil prices may need to rise to around $150 per barrel to match the decrease in supply by lowering demand." AI trading faces a "life-or-death test": Alphabet's financial report as a key indicator Apart from the impact of oil prices, AI trading is facing a critical test. Alphabet Inc. Class C's parent company Alphabet (GOOGL.US) will release its second-quarter financial report after the US market closes on Wednesday. Alphabet is widely seen as the winner in the AI competition, with its first-quarter revenue breaking the $100 billion mark for the third consecutive quarter, increasing by 22% year-on-year to $109.9 billion, and net profit soaring by 81% year-on-year to a record $62.6 billion. Alphabet Inc. Class C's cloud performance was particularly outstanding, with revenue growing by 63% to $20 billion, the fastest among major cloud service providers. However, the market's focus has shifted to AI capital expenditures. Alphabet's first-quarter capital expenditures increased by 107% to $35.7 billion year-on-year, and the forecast for fiscal year 2026 has been raised to $180 billion to $190 billion. Kevin Mahn, Chief Investment Officer at Hennion & Walsh Asset Management, warned that any signals from Alphabet of cutting AI investment budgets could trigger a chain reaction throughout the AI industry. Tokic pointed out that any signs of a halt in AI capital expenditures could accelerate what he calls the "bursting of the AI bubble" - a expectation that has already been priced into semiconductor stocks. In fact, chip stocks have already made significant adjustments. The Philadelphia Semiconductor Index fell by approximately 10% last week, marking the largest single-week decline in over a year, and has retraced by over 20% from its historical high in June, officially entering a technical bear market. Data from Turning Point Market Research shows that the proportion of semiconductor stocks in a short-term "double trend" buy signal has plummeted from 91% a month ago to 24%, marking the most drastic deterioration since 2010. The decline in global AI and semiconductor stocks is resonating. The Nikkei Semiconductor Stock Index has fallen by 30% from its peak; the South Korean KOSPI index has dropped by 25% since its high on June 22, with over 1.2 million retail accounts reaching the margin call due to a stampede on leveraged ETFs. High inflation: a "policy choice" rather than an economic inevitability Mark Zandi, Chief Economist at Moody's Corporation, issued a warning at the policy level. He pointed out that the persistent high inflation - currently running at around 3.5%, well above the Fed's 2% target - is largely the result of policy choices. Although the year-on-year CPI in the US fell from its high of 4.2% to 3.5% in June, and core CPI dropped to 2.6%, the Middle East situation has once again pushed up energy prices, leaving the inflation outlook full of uncertainty. Zandi previously warned that if inflation expectations continue to rise, the Fed may be forced to further raise interest rates, even at the risk of triggering a full-blown recession. Futures market data shows that traders are betting on a cumulative rate hike by the Fed of about 29 basis points before the end of the year, with a probability of a rate hike in September at around 60%. At the same time, the yield on the US 30-year Treasury bond has once again broken through the psychological barrier of 5%, a level that often attracts funds to move from stocks to fixed-income assets.