Musk bets big on Chips and AI 21/05/2025

HOT stories for today

US market wrap:

• After a six-day winning streak and 19 gains in the past 25 sessions, the S&P 500 lost momentum on Tuesday and closed lower. The index declined by 0.39%, while the Nasdaq Composite slipped 0.38%. The Dow Jones Industrial Average dropped 114.83 points, or 0.27%. Investors rotated out of tech stocks, which had been driving the recent rally. Concerns are mounting among retailers and Federal Reserve officials over potential summer price hikes stemming from tariffs.
• Meanwhile, Republicans remain divided on tax legislation, and after such a strong rally, the market appears to be losing steam—especially following a $4 billion dip-buy by retail investors on Monday, as noted by JPMorgan analysts. Crude prices climbed on reports that Israel may strike Iran’s nuclear facilities. At the same time, JPMorgan CEO Jamie Dimon cautioned that investor "complacency" could be risky, as markets continue to brush off negative headlines.
   

Musk bets big on Chips and AI

• Elon Musk said Tuesday that Tesla (TSLA) and xAI will continue purchasing chips from Nvidia (NVDA) and AMD (AMD) as demand for AI computing power grows. His AI startup xAI, now owner of platform X, has already installed 200,000 GPUs at its Memphis-based Colossus facility and plans to build a new 1 million-GPU center nearby. Musk reiterated that chip availability remains the biggest bottleneck for AI—though he expects the next constraint to be electricity. He warned of a potential power shortage by mid-2026 as AI energy demands surge.
• While Memphis officials praised xAI’s investment, environmental groups have raised concerns over the project’s heavy reliance on gas-powered turbines, claiming possible Clean Air Act violations. Musk also hinted that a Tesla-xAI merger isn’t off the table, though it would require shareholder approval. xAI has already spent over $225 million on Tesla’s Megapacks for large-scale energy storage.

Stocks on the move:

• Palo Alto Networks (PANW) — Shares of the cybersecurity firm dropped nearly 4% after it reported $13.5 billion in remaining performance obligations for its fiscal third quarter, slightly missing the $13.54 billion estimate from analysts surveyed by StreetAccount.
• Take-Two Interactive Software (TTWO) — The video game developer's stock declined 3% following news of a proposed $1 billion common stock offering. JPMorgan and Goldman Sachs are acting as the lead bookrunners for the issuance.
• Keysight Technologies (KEYS) — Shares gained 5% as the electronic testing solutions provider posted better-than-expected earnings for its fiscal second quarter, beating Wall Street projections.
• Toll Brothers (TOL) — The luxury homebuilder saw its stock jump 6% after reporting second-quarter earnings of $3.50 per share, surpassing the $2.83 consensus forecast from LSEG analysts.

Today’s action

• Asia-Pacific markets mostly advanced on Wednesday, shrugging off Wall Street's pullback after a six-day winning streak. Japan’s Nikkei 225 dipped 0.23% following another decline in exports, pressured by sweeping U.S. tariffs under President Donald Trump. Meanwhile, South Korea’s Kospi rose 0.58% and Hong Kong’s Hang Seng Index gained 0.45%.
• In the U.S., futures were slightly lower Tuesday night. S&P 500 futures and Nasdaq 100 futures each slipped 0.1%, while Dow futures dropped 59 points. Traders remain focused on developments around the federal budget and deficit, with no major economic data on deck for Wednesday. Instead, attention turns to earnings: Lowe’s (LOW), Target (TGT), Canada Goose (GOOS), and TJX Companies (TJX) report pre-market, while Snowflake (SNOW) is set to release results after the bell.

Watchlist: NVDA, LOW, TGT, SNOW, TJX, TTWO, PANW

Bitcoin

• Bitcoin (BTC) is trading just under $107,000, after touching an intraday peak of $107,340. The top cryptocurrency is now in its 13th straight day above six figures, gaining 1.5% on the day and pushing its market cap to approximately $2.12 trillion.
• Momentum has remained strong since Sunday’s bullish weekly close, with BTC now just 2.36% shy of its all-time high of $109,356. Over $36 billion in trading volume has flowed through the market in the past 24 hours, signaling intense investor interest. Meanwhile, XRP is making headlines as CME launches futures trading for the token, marking a major step into institutional adoption.
  Watchlist: Bitcoin: 90 000-109 300, Ethereum:1500-2800, Solana: 80-180

Forex

• EUR/USD edged up 0.42% to around 1.1330 in early European trading Wednesday, buoyed by broad U.S. dollar weakness. The pair remains supported above its 100-day EMA, with a bullish RSI suggesting continued upside. Key resistance sits at 1.1382, while initial support is seen at 1.1211. The move comes as Moody’s recent downgrade of the U.S. credit rating to ‘Aa1’ adds fuel to the “sell America” narrative, citing long-standing fiscal challenges.
• The Japanese yen continues its upward run against the USD, driven by expectations of further rate hikes from the Bank of Japan in 2025. BoJ Deputy Governor Uchida’s hawkish tone and optimism around a potential U.S.-Japan trade deal have boosted safe-haven demand. USD/JPY remains under pressure, with fundamentals favoring further downside.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-151

Basic Materials

• WTI crude oil climbed to around $62.95 in early Asian trading Wednesday, supported by fresh geopolitical concerns. CNN reported U.S. intelligence believes Israel may be preparing to strike Iranian nuclear facilities, lifting prices. However, upside momentum may be capped by a 2.499 million barrel increase in U.S. crude inventories last week, per API data, and continued pressure from Moody’s U.S. credit downgrade.
• Gold (XAU/USD) rose for a third straight session, breaking above $3,300 to hit a 1.5-week high. A sustained decline in the U.S. dollar—driven by fiscal concerns and expectations of Fed rate cuts—continues to support the precious metal. Rising U.S.-China trade tensions and heightened global geopolitical risk further boost safe-haven demand for gold.
  Watchlist: GOLD 2600-3500, US Oil: 55.60-70.00
  
   

Key Economic Events Today:

EST time
10:30 am: USD Crude Oil Inventories
12:15 am: USD FOMC Member Barkin Speaks
12:15 am: USD FOMC Member Bowman Speaks


Earnings

BMO (Before the US Market opens)
TJX                TJC Companies Inc.
LOW               Lowe’s Companies
MDT               Medtronic Plc
TGT                Target Corp.
BIDU               Baidu Inc.
AMC (After the US Market closes): ZM, SNOW, URBN
 

The TEFS Analyst team wishes you a successful day!