The AI Trade Split in Half on Day One of Q3
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We owe you an apology. We missed several days of sends while migrating to a new email platform.
We are back now, and we are not going anywhere. You will receive your daily briefing every morning before the bell, just as before.
One favor: to make sure these editions land in your primary inbox and not spam or promotions, please reply to this email with any word, or drag it into your Primary tab if you use Gmail. That one step keeps us connected.
Thank you for your patience. We are glad to be back, and we will keep earning your open every single morning.
NFP Day • The Second Half Begins
Chips Crashed 10% on Day One of Q3. Meta Rallied 9%. Same Session.
The best quarter since 2020 ended Tuesday. The first session of Q3 reversed the trade that drove it. Today’s jobs number decides if the rotation holds.
Thursday, July 2, 2026 • NFP at 8:30 AM ET • Markets closed tomorrow for Independence Day
Key Idea
The S&P 500 gained 14.9% last quarter. The Nasdaq gained 21.4%. Best since 2020. Then Q3 opened and the trade flipped. Micron fell 10.6%. AMD fell 6.9%. Intel dropped 9%. Meta surged 9% on a cloud-monetization report. The market is repricing who profits from AI spending. The June jobs report drops at 8:30 this morning. That number decides whether the new trade accelerates or reverses before a long weekend.
What Q3 Opened With
Tuesday was a celebration. The Dow closed at 52,319. Record. The S&P 500 finished at 7,449. The Russell 2000 surged 22% in six months. That is the small-cap index tracking 2,000 smaller companies. Best first half since 1991. If you checked your retirement account Tuesday night, you saw a number you liked.
Wednesday told a different story.
The Dow touched 52,743 intraday, then reversed. Closed down 14 points. The Nasdaq dropped 0.66%. Caterpillar, the industrial giant that carried the Dow all quarter, fell nearly 7%.
The real damage was in chips. Micron, the memory chipmaker that crossed $1 trillion last month, fell 10.6%. SanDisk fell 10.6%. AMD dropped 6.9%. Intel lost 9%. Applied Materials dropped 10%. These stocks gained 80% in the first half. Gave back double digits on Day One.
Think about that for a second.
Meanwhile, Meta rallied almost 9%. That is Facebook’s parent company. Bloomberg reported Meta is building a cloud business called Meta Compute. The plan: sell excess AI computing power. Meta has poured $145 billion into data centers and chips. The market decided that spending might generate revenue — not just costs. Microsoft rose 3%. Amazon gained 1.4%. Alphabet added 1.1%.
Wednesday told a different story.
The Dow touched 52,743 intraday, then reversed. Closed down 14 points. The Nasdaq dropped 0.66%. Caterpillar, the industrial giant that carried the Dow all quarter, fell nearly 7%.
The real damage was in chips. Micron, the memory chipmaker that crossed $1 trillion last month, fell 10.6%. SanDisk fell 10.6%. AMD dropped 6.9%. Intel lost 9%. Applied Materials dropped 10%. These stocks gained 80% in the first half. Gave back double digits on Day One.
Think about that for a second.
Meanwhile, Meta rallied almost 9%. That is Facebook’s parent company. Bloomberg reported Meta is building a cloud business called Meta Compute. The plan: sell excess AI computing power. Meta has poured $145 billion into data centers and chips. The market decided that spending might generate revenue — not just costs. Microsoft rose 3%. Amazon gained 1.4%. Alphabet added 1.1%.
Who Profits From the AI Buildout
For six months, the AI trade had one rule. Buy the picks and shovels. That trade delivered 80% returns. Now Wall Street is asking who turns the chips into cash.
Meta’s answer is the clearest signal yet. The company is not just spending on AI. It is monetizing the surplus. Read that again. The biggest complaint about hyperscaler capex was that nobody could see the return. One Bloomberg report changed the math for a $1.58 trillion company in a single session.
This is not the first company to try it. SpaceX, through its xAI division, signed deals to lease Colossus data center capacity to Anthropic, Google, and Reflection AI. Those deals total $27.8 billion in annual revenue. The template is forming: if you own surplus compute, sell it. If your AI spending has no revenue line, the market will reprice you lower. Watch for that theme when earnings season starts mid-July.
Meta’s answer is the clearest signal yet. The company is not just spending on AI. It is monetizing the surplus. Read that again. The biggest complaint about hyperscaler capex was that nobody could see the return. One Bloomberg report changed the math for a $1.58 trillion company in a single session.
This is not the first company to try it. SpaceX, through its xAI division, signed deals to lease Colossus data center capacity to Anthropic, Google, and Reflection AI. Those deals total $27.8 billion in annual revenue. The template is forming: if you own surplus compute, sell it. If your AI spending has no revenue line, the market will reprice you lower. Watch for that theme when earnings season starts mid-July.
Warsh, Jobs, and the Number at 8:30
Warsh took the stage in Sintra, Portugal, on Wednesday. No prepared remarks. No slides. Just a chair and a microphone at the ECB Forum. “Prices are too high,” he said. No forward guidance. No hints about July. He added that inflation risks have eased over the past month.
The ADP report landed the same morning. Private employers added 98,000 jobs in June. That is the number from ADP, the payroll processor tracking 26 million workers. The estimate was 110,000. Nearly half the hiring came from healthcare and education. Leisure and hospitality added 2,000. That is the sector that tells you whether families are still eating out.
The 10-year Treasury yield rose toward 4.50%. That is the rate the government pays to borrow for a decade. It controls your mortgage and your car loan. It climbed because Warsh talked tough even as the data softened beneath him.
Now the official verdict. June nonfarm payrolls drop at 8:30 Eastern. The estimate is 115,000. May delivered 172,000. Unemployment forecast: 4.3%. Last major data point before the holiday.
Monday brings its own catalyst. SpaceX joins the Nasdaq-100 on July 7. Musk’s rocket, satellite, and AI company went public June 12. Raised $85.7 billion. J.P. Morgan estimates $4.3 billion in forced passive buying. If you own QQQ in your 401(k), you will own SpaceX by Tuesday without placing a trade.
Oil tells one more story. WTI fell below $68. Lowest since late February. Brent posted its worst quarter since 2020, down 23%. Iranian exports surged past 40 million barrels. Russian shipments hit records. We told you the peace dividend would show up at the pump. If you filled up this week, you felt it.
One number at 8:30. Your brokerage app will tell you by 9:00.
The ADP report landed the same morning. Private employers added 98,000 jobs in June. That is the number from ADP, the payroll processor tracking 26 million workers. The estimate was 110,000. Nearly half the hiring came from healthcare and education. Leisure and hospitality added 2,000. That is the sector that tells you whether families are still eating out.
The 10-year Treasury yield rose toward 4.50%. That is the rate the government pays to borrow for a decade. It controls your mortgage and your car loan. It climbed because Warsh talked tough even as the data softened beneath him.
Now the official verdict. June nonfarm payrolls drop at 8:30 Eastern. The estimate is 115,000. May delivered 172,000. Unemployment forecast: 4.3%. Last major data point before the holiday.
Monday brings its own catalyst. SpaceX joins the Nasdaq-100 on July 7. Musk’s rocket, satellite, and AI company went public June 12. Raised $85.7 billion. J.P. Morgan estimates $4.3 billion in forced passive buying. If you own QQQ in your 401(k), you will own SpaceX by Tuesday without placing a trade.
Oil tells one more story. WTI fell below $68. Lowest since late February. Brent posted its worst quarter since 2020, down 23%. Iranian exports surged past 40 million barrels. Russian shipments hit records. We told you the peace dividend would show up at the pump. If you filled up this week, you felt it.
One number at 8:30. Your brokerage app will tell you by 9:00.
The Halftime Rotation
A hyperscaler gained more in one session than any chipmaker gained in a month. First time since the AI rally began. That is a phase change, not a pullback. Meta proved that AI capex can have a revenue story. Every hyperscaler reporting in July faces the same test. Show the monetization plan. Or watch the discount widen. If you own QQQ, SpaceX joins Monday. The passive portfolio you chose once is shifting underneath you.
Three Scenarios
◆ Base
NFP near 115K. Unemployment holds at 4.3%. The 10-year holds 4.45–4.55%. The chip-to-deployer rotation continues. If you hold SMH or SOXX, trim 5–10% and rotate into XLK, which weights Microsoft, Apple, and Meta more heavily. Oil drifts toward $66–68. S&P 500 holds 7,400–7,550 through Monday. SpaceX inclusion on July 7 lifts QQQ modestly but SPCX stays at $155–175.
▲ Upside
NFP below 80K. Unemployment ticks to 4.4%. Rate-hike odds collapse. The 10-year falls below 4.40%. Growth stocks rally 1.5–2.5% into the holiday. Chips bounce 3–5% on relief. Meta pushes toward $640. The Russell 2000 breaks above 3,050. SPCX catches a bid ahead of $4.3 billion in passive rebalancing. Oil falls to $65. S&P 500 retests 7,500.
▼ Risk
NFP above 175K. Wages accelerate past 0.4% month-over-month. September hike probability jumps above 70%. The 10-year breaks 4.55%. The ADP miss was a head fake. Chips resume selling, down 3–5%, dragging the Nasdaq below 25,700. Oil catches a bid toward $72. Thin pre-holiday liquidity amplifies every move 30–50%. A 1.5–2.5% S&P 500 pullback into the long weekend becomes the base case. Warsh’s silence means nobody knows if September brings a hike or a hold.
Our View
The first half was generous. Dow up 8.9%. S&P up 9.6%. Nasdaq up 12.8%. Russell 2000 up 22%. That was a tailwind for every retirement account in America.
The second half introduced a new variable in its very first session. Not a selloff. A split. The AI supply chain lost 7–11% while the companies deploying that supply chain — Meta, Microsoft, Amazon — gained 1–9%. We told you weeks ago the question was shifting from who builds to who monetizes. Wednesday priced it in.
Oil below $68 is the peace dividend arriving at your gas station. Iranian exports above 40 million barrels. Brent’s worst quarter since 2020. That argues for softer energy costs in the July 14 CPI print. Warsh at Sintra saying “prices are too high” without giving guidance is the new Fed regime arriving at your brokerage app. Both signals lean disinflationary. Both argue for eventually lower rates. But Warsh will not move until the data moves first.
Today’s jobs number is the opening line of that data. Position for the deployers. Not just the builders.
The second half introduced a new variable in its very first session. Not a selloff. A split. The AI supply chain lost 7–11% while the companies deploying that supply chain — Meta, Microsoft, Amazon — gained 1–9%. We told you weeks ago the question was shifting from who builds to who monetizes. Wednesday priced it in.
Oil below $68 is the peace dividend arriving at your gas station. Iranian exports above 40 million barrels. Brent’s worst quarter since 2020. That argues for softer energy costs in the July 14 CPI print. Warsh at Sintra saying “prices are too high” without giving guidance is the new Fed regime arriving at your brokerage app. Both signals lean disinflationary. Both argue for eventually lower rates. But Warsh will not move until the data moves first.
Today’s jobs number is the opening line of that data. Position for the deployers. Not just the builders.