Chips Cool Down After the AI Rally

Summer has arrived well ahead of schedule. With thermometers seemingly locked above 35°C and air conditioners now promoted to safe-haven assets, it is only natural to wonder whether the record-breaking heat has also spread to financial markets. The answer, at least judging by recent weeks, is a firm “it depends.” While the heat has been constant, stock markets have alternated between scorching days and sudden storms, particularly within the technology sector.

The best analogy is probably this: semiconductors have been like asphalt during the hottest hours of the afternoon. They became so overheated that some investors felt it was time to slow down before their shoes started melting too. After an extraordinary first half of the year, fuelled by the race to invest in artificial intelligence, the chip sector experienced several profit-taking sessions, some of them rather severe. After all, when a sector rises almost uninterrupted for months, it takes only a light breeze—or doubts about valuations—to persuade some investors to lock in profits.

Despite these corrections, the structural investment theme remains intact: demand for high-performance memory, GPUs, HBM (High Bandwidth Memory), and AI infrastructure continues to be one of the strongest drivers of global growth.

The paradox is that just as investors began to wonder whether AI fever had become too intense, corporate earnings reminded everyone that solid fundamentals still underpin the excitement. Guidance from memory manufacturers such as Micron confirmed strong demand and long-term order visibility—factors that are rarely associated with a passing fad. This does not eliminate the risk of volatility, but it suggests that the story is far from over. Rather, we are probably entering a phase in which the market is demanding a bit more pricing discipline. In the coming days, second-quarter corporate results will be released. We are likely to receive further confirmation of how much economic growth is being driven by AI investment, and we may also begin to see some early effects on the profit margins of companies that have already implemented AI technologies.

The performance of global equity markets reflects this delicate balance between enthusiasm and caution. In the United States, major indices continue to trade near record highs, supported by an economy that, although gradually slowing, still demonstrates remarkable resilience. At the same time, an increasingly clear sector rotation is underway. In recent sessions, the Dow Jones Industrial Average has continued to reach new highs, while parts of the technology sector—and semiconductors in particular—have taken a well-deserved breather. It serves as a classic reminder that, in financial markets, even the winners occasionally need time to catch their breath.

Europe has also maintained a constructive tone. The prospect of a less restrictive monetary policy compared to recent months, combined with generally orderly macroeconomic data, has enabled investors to look beyond geopolitical and trade-related uncertainties. Concerns about tariffs and tensions in technology supply chains naturally remain unresolved, but for now the prevailing view is that investment in artificial intelligence represents a multi-year cycle rather than a short-lived speculative craze.

In Asia, meanwhile, the heat has been even more intense. South Korea, which has effectively become a global thermometer for the memory-chip industry, experienced swings worthy of a mountain climate, with sharp declines immediately followed by spectacular rebounds in Samsung and SK Hynix shares. More than volatility, it resembled a Finnish sauna applied to stock markets. The explanation, however, remains rational: when an industry grows at exceptional rates, expectations rise just as rapidly, and every piece of news—positive or negative—is amplified.

The overall impression is that the market is undergoing a period of consolidation rather than a reversal. Valuations for many AI-related companies are undoubtedly demanding, making episodes of volatility entirely natural. Nevertheless, the investment trajectory of major cloud providers, data centres, and the broader technology supply chain continues to suggest that semiconductor demand will remain elevated for many years to come. The real challenge will be distinguishing between companies that will genuinely benefit from this cycle and those that have merely learned to include the letters “AI” in every investor presentation.

For portfolio managers, the message remains unchanged. It is appropriate to remain enthusiastic about major structural growth themes, but without forgetting that even the best marathon runner occasionally needs a stop at the refreshment station. In other words, the heat may persist for a long time, but that does not mean it is necessary to keep running under the midday sun.

After all, the market and summer share one characteristic: after days when it seems impossible to endure even one more degree of heat, a sudden storm is enough to remind us that the perfect temperature does not exist. The same applies to the weather, to semiconductor valuations, and—above all—to investors, who occasionally discover that even chips need time to cool down.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

Angelo Meda is Head of Equities at Banor SIM S.p.A. and provides research and advisory input to Banor Capital Ltd pursuant to an advisory agreement.

This article is an English translation of an article originally prepared and published by Banor SIM.

L'articolo Semiconductors and Weather proviene da Banor Capital Ltd.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

L'articolo Tight spreads, hotter rates and a BDC silver lining proviene da Banor Capital Ltd.

In May, we saw eight consecutive days of stock market gains, a trend that has not yet been interrupted, and we have now entered the ninth consecutive week with positive indices. Anyone hoping for a pause after the strong gains of recent months would have been disappointed: the market politely replied with a resounding “not yet.” Even in recent days, investors have continued to buy equities with a conviction that, in some ways, resembles tourists booking a weekend getaway without even checking the weather.

Technology remains the star, artificial intelligence is centre stage, and indices are close to historic highs. The Nasdaq continues to behave like the model student of the class, while the S&P 500 follows closely behind, supported by earnings growth that, for now, justifies much of investors’ enthusiasm. The real question among market participants is always the same: how long can this last? For the moment, the market’s answer seems to be “longer than we think.”

For a while, every quarterly earnings call of listed companies revolved around buzzwords such as cloud, digital, or metaverse. Today, there is only one magic word: artificial intelligence. Any company even loosely connected to chips, data centres, software, or digital infrastructure is being watched very closely. Every time a company reports better-than-expected results, the market interprets it as yet another confirmation that the major investment cycle linked to AI is still in its early stages.

It’s a bit like watching a party that keeps attracting new guests: as long as new people keep arriving, no one really thinks about going home.

Of course, valuations for some stocks have reached significant levels, and it would be naive to think the path can always be linear. However, so far earnings are growing fast enough to allow investors to sleep relatively soundly.

Meanwhile, the Federal Reserve continues to play the role of the neighbour everyone watches from their window: every economic data point is analysed in detail in hopes of understanding the central bank’s next move. Inflation continues to show signs of moderation, but not enough for central bankers to declare the battle definitively over. This week, labour market data will be released, and any possible outcome seems positive. If job creation slows, the prevailing view will be that the fight against inflation is nearing completion; if growth continues, the positive interpretation of full employment will dominate. If the expected 85,000 new jobs are confirmed, it would create an ideal scenario of stable unemployment near its lows and trends that could persist.

For now, the market seems to have found an almost perfect balance: sufficient economic growth to support earnings, but not so strong as to reignite inflation fears. A delicate balance, yet surprisingly resilient.

On one hand, Wall Street confirms itself as the “rock star of the world tour,” while Europe plays the role of the reliable musician who rarely makes the cover but always performs well. European markets have participated in the global rally, supported by generally encouraging corporate results and a European Central Bank increasingly inclined toward a gradual easing of monetary conditions. The Italian stock market continues to deliver strong results. After years of trailing other international exchanges, Italy now finds itself in a much more interesting position, supported by solid banks, competitive industrial companies, and still reasonable valuations. It may not be the loudest market, but that is often its strength.

Geopolitical tensions have brought some volatility back to the energy market, and oil has shown signs of awakening. Whenever crude rises sharply, investors immediately begin to question the potential impact on inflation. For now, however, market reaction has been almost indifferent, as shown in Figure 1. It is as if investors have decided that, as long as earnings continue to grow and the global economy shows no clear signs of slowing, some geopolitical tension can be tolerated without too much drama—further evidence of how constructive sentiment remains. 

Figure 1: Rising oil volatility has not disrupted the upward trajectory of equity markets, underscoring the resilience of the current rally.

And now?

Looking ahead, the outlook remains favourable but not without risks. On one side, we have companies generating solid profits, still-resilient consumers, and a technological revolution that fuels enthusiasm and investment. On the other, we see elevated valuations, very ambitious expectations, and markets that seem to have already priced in a lot of good news. In other words, the bull market continues its run, but is beginning to show signs of fatigue. For investors, this does not necessarily mean turning pessimistic, but rather remembering that even in the strongest bull markets there are pauses, profit-taking phases, and sudden returns of volatility (not to mention that within indices there are many stocks, and they do not always move in unison).

That said, the feeling is that the market has not yet exhausted its energy. Artificial intelligence remains the main fuel, liquidity is still abundant, and central banks, while cautious, do not seem inclined to hinder growth.

In short, the past week has reinforced a simple message: markets continue to see the glass as half full—perhaps even more than half. For now, no one seems in any particular hurry to remember where the exit to the party is.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

Angelo Meda is Head of Equities at Banor SIM S.p.A. and provides research and advisory input to Banor Capital Ltd pursuant to an advisory agreement.

This article is an English translation of an article originally prepared and published by Banor SIM.

L'articolo The Market Party Continues proviene da Banor Capital Ltd.

European Credit: Rates Stole the Show

In the latest “Bonds in a Blink” episode, Francesco Castelli looks at the recent repricing in rates and the divergence between bonds and risk assets, and what it means for European credit.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

L'articolo European Credit: Rates Stole the Show proviene da Banor Capital Ltd.

Aircraft are designed with redundancy: one functioning engine guarantees the necessary thrust, flight control, and power for the instruments, allowing the aircraft to continue flying or to land at a nearby airport. ETOPS certification (Extended-range Twin-engine Operations Performance Standards) ensures that an aircraft can cover long oceanic distances even with only one engine operating. Replacing older three- or four-engine aircraft used for long-haul routes with cheaper and more reliable twin-engine planes has revolutionized the aviation industry.

Financial markets do not have built in redundancy, but in general they do have propulsion mechanisms that drive global equity markets: earnings growth, dividends, buybacks, and multiple expansion. The first three, which are clear and measurable, have so far supported the market, while the last is more uncertain. In theory it depends on variables such as interest rates and inflation, but in reality it is also strongly linked to psychology and investor sentiment.

We are now, however, in a phase where one of these engines seems to be losing thrust—or even shutting down—for some companies with significant weight in the indices: buybacks. We are not referring to the weeks prior to earnings releases, when US regulations require companies to suspend share repurchases to prevent accusations of insider trading or the sending of potentially misleading signals to investors.

If we look at the first-quarter 2026 cash flow statements of two companies that reported earnings at the end of April, Meta and Alphabet, the line item “Repurchases of stock” is zero for both. A year ago, they had spent $12 billion and $15 billion respectively.

This means there is no longer excess cash available to return to shareholders and, unwilling to materially increase gross debt, companies are forced to cut the simplest form of discretionary spending—buybacks.

What does this imply for company valuations? It is difficult to say, but we can make two observations.

The first is that if companies continue to use shares as part of employee and executive compensation (stock based compensation), then each year, instead of buybacks having a positive impact on earnings per share growth, the effect will be negative. To give a sense of scale, stock based compensation at Alphabet accounted for almost 10% of total costs in the first quarter of 2026.

The second is that over the long term, the market will evaluate the return on these investments. If a company, instead of buying back its own shares, invests in machinery, research and development, or acquisitions that generate a return above the cost of capital, it will by definition create value. To date, hyperscalers have invested around $1.5 trillion and are expected to exceed $2 trillion by the end of the year. If, for example, we assume a cost of capital of 10%, this implies generating roughly $200 billion per year in additional operating profit—essentially creating a new Google in a relatively short period of time.

For now, therefore, the market resembles an aircraft flying with one engine out: it can still stay aloft, but with reduced range, and soon it will be necessary to assess the returns on these investments or see whether other sectors resume providing thrust. In the meantime, we stay on course, but should expect a slowdown and some turbulence.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

Angelo Meda is Head of Equities at Banor SIM S.p.A. and provides research and advisory input to Banor Capital Ltd pursuant to an advisory agreement.

This article is an English translation of an article originally prepared and published by Banor SIM.

L'articolo Redundancy in aeroplanes proviene da Banor Capital Ltd.

Isaac Newton was one of the greatest scientists in history, and the theories that bear his name are still fundamental to the study of mathematics, physics, and astronomy. One of the most important is the first law of dynamics, according to which a body maintains its state of rest (still) or uniform rectilinear motion (constant velocity in a straight line) as long as the net external force acting upon it is zero.

Inertia, therefore, is an object’s resistance to changing its state. In a theoretical physical model, acceleration (or deceleration) is zero and the body travels equal distances in equal intervals of time, with no friction or external forces altering its motion.

When looking at equity markets, one is reminded of this uniform rectilinear motion: stock indices are reaching new highs and, despite ups and downs, volatility appears to be diminishing, leaving what looks like a straight upward line.

Can we therefore say that markets are destined to rise steadily and that every pullback represents a buying opportunity?

So far this has been the case—but for one reason only: earnings growth has been much stronger than geopolitics. The introduction of tariffs about a year ago, the Russia–Ukraine war, developments in Venezuela, and tensions involving Iran have not materially affected corporate performance, which has been more resilient and consistent than expected. Looking back twelve months, no one would have bet on double‑digit earnings growth accelerating despite macroeconomic uncertainty, global fragmentation, and geopolitical conflicts that are likely to persist.

However, we are in a historical phase marked by very high concentration. While it is true that the US equity index, the S&P 500, is at all‑time highs, only thirteen of its 500 constituent companies are at record levels. The rest are on average 12% below their peaks and are mainly “old economy” companies—industrial firms or those with limited exposure to today’s dominant theme: artificial intelligence. It is estimated that 40% of US earnings growth is driven by investments in data centres, cloud infrastructure, or AI development algorithms. Including the energy required to sustain these technological advances, the figure rises well above 50%.

Looking at consumption, it appears that it has not been significantly affected by the war. Although gasoline prices in the US have risen by more than 40% since the beginning of the conflict—costing American consumers around $140 billion—the expectation is that this will be offset by a reduction in the savings rate, which was already compressed by the inflation increase of recent years.

We are therefore in an inertial world from the standpoint of market expectations: it is assumed that everything will continue as before, drawing on reserves and carrying on development based on a model that combines consumption and investment. The latter appears increasingly concentrated in the technology sector, with the difference that in the past Big Tech companies were characterised by strong cash generation thanks to capital‑light business models.

In Europe, we are drawing on reserves as well—not private savings, which remain high and defensive, but public debt. We can expect deficits to increase over the coming years across most European countries, driven by initiatives to contain rising energy costs, policies aimed at energy sovereignty (possibly involving a renewed focus on renewables), and defence spending, which is expected to rise for at least a decade after having declined since the end of the Cold War. Once again, a state of inertia emerges that favours more traditional sectors such as banks and energy, while leaving consumption‑ and investment‑related stocks somewhat in limbo, as they do not benefit from the same dynamics as in the United States.

A sense of inertia is also perceptible in the Chinese economy. On the one hand, the communication strategy of the Beijing government tends to suppress acknowledgment of problems; on the other, companies financed and coordinated by local and provincial governments are quietly working to build a technological and industrial system alternative to the American one, based on investment and the development of local expertise.

This state of inertia has not been disrupted by geopolitics or by tensions between governments. Companies have continued to pursue their development paths and investment policies. As long as these do not change, there will be no forces capable of significantly altering the trajectory of the markets. For this reason, the investment policies of technology giants must be monitored ever more closely: if and when capital expenditure slows, one of the most important levers that has supported market gains will disappear.

If no additional catalyst emerges, inertia will come to an end and we will face more uncertain times. Until then, we continue to move along this uniform straight line.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

Angelo Meda is Head of Equities at Banor SIM S.p.A. and provides research and advisory input to Banor Capital Ltd pursuant to an advisory agreement.

This article is an English translation of an article originally prepared and published by Banor SIM.

L'articolo Newton’s first Law proviene da Banor Capital Ltd.

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L'articolo Francesco Castelli interviewed by CNBC’s Europe proviene da Banor Capital Ltd.

US BDCS: NEW OPPORTUNITIES IN ILLIQUID CREDIT

In the new episode of the video series “Bonds in a Blink” Francesco Castelli analyzes the recent volatility in bond markets, including rising interest rate expectations, relatively stable spreads, and new opportunities in illiquid debt.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

L'articolo US BDCS: New Opportunities in Illiquid Credit proviene da Banor Capital Ltd.

GEOPOLITICAL TENSIONS AND RATE REPRICING: DURATION OR PRIVATE DEBT?

In the latest episode of the video series “Bonds in a Blink”, Francesco Castelli examines the rise in interest rates, the trend in spreads, and the opportunities emerging in the most pressured segments of the credit market.

This communication is issued by Banor Capital Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 523080). For Professional Clients and Eligible Counterparties only. Not for Retail clients. The content is for information purposes only and does not constitute investment advice, a recommendation, or an offer/solicitation to buy or sell any investment. Views are those of the speaker and may change. Any views expressed regarding future market conditions, sector performance, or investment returns are forward-looking statements and may not materialise. Actual outcomes may differ materially. Forecasts are not a reliable indicator of future performance. This communication is not directed to any person in any jurisdiction where doing so would be unlawful; distribution may be restricted.

L'articolo Geopolitical Tensions and Rate Repricing: Duration or Private Debt? proviene da Banor Capital Ltd.

Watch the full video here (Italian).

The contents provided for in this section have not been audited by independent bodies. There are no warranties, expressed or implied, regarding reliability, accuracy or completeness of the information and opinions contained. The information provided is not based on assessment of the adequacy and do not consider the risk profile of the possible recipients, and therefore, should not be construed as personal recommendation and does not constitute investment advice. The contents of this site may not be reproduced and/or published whole or in part, for any purpose, and/or disclosed to third parties.

L'articolo Francesco Castelli Interviewed By Class CNBC proviene da Banor Capital Ltd.