Author: Fiona Craig

Corporate earnings continue driving equity markets higher

Global stock markets are holding near record levels despite the continued closure of the Strait of Hormuz and mounting concerns over slowing growth and persistent inflation, according to Goldman Sachs.

In a note led by strategist Peter Oppenheimer, the bank argued that strong corporate earnings remain the primary force supporting equities.

“earnings growth is robust,” Goldman wrote, pointing to projected nominal global GDP growth of 5.9% this year, compared with 4.7% in 2025.

AI spending and energy prices fuel market momentum

Goldman said the rally has been powered mainly by technology and energy stocks.

Analysts’ consensus estimates for S&P 500 earnings per share in 2026 and 2027 have both been revised upward by 8 percentage points so far this year, driven largely by expectations for stronger artificial intelligence investment and elevated oil prices.

The bank noted, however, that the market advance remains unusually concentrated.

The S&P 500 is up about 10% year to date in 2026, with technology, media and telecom stocks responsible for roughly 85% of those gains.

South Korea, which has benefited significantly from the global semiconductor boom, has rallied nearly 80% this year.

Goldman sees signs of excessive market optimism

Despite the ongoing rally, Goldman warned that several warning signals are beginning to emerge.

The bank said its Risk Appetite Indicator moved above 1.1 last week, reaching the 99th percentile of historical readings going back to 1991.

Retail trading activity has also surged, with volumes climbing 28% since mid-April.

Meanwhile, rising bond yields have continued to compress equity risk premia.

Goldman cautioned that “if oil disruptions continue into the second half of this year and inflation expectations rise further, there is a real risk of a speed bump for equity markets.”

Bond market volatility could trigger a correction

The bank also highlighted rising government bond yields as a potential catalyst for a broader pullback in equities.

According to Goldman, increasing government borrowing needs are placing upward pressure on long-term yields globally, creating an additional headwind for stock markets as financial conditions become tighter.

RBC Capital Markets believes the S&P 500 still has room to move higher over the next year, setting a 12-month target of 7,900, which represents approximately 7.7% upside from early May levels.

Even so, the firm warned that investors should be prepared for periods of market weakness along the way.

Lori Calvasina, RBC Capital’s chief U.S. equity strategist, said the bank does not expect stocks to rise in a straight path, but added that any downturn would likely amount to no more than “a tier 1 garden-variety pullback in the 5-10% range.”

RBC views the probability of a larger 14% to 20% market decline as relatively low unless concerns about a recession begin to intensify again.

The bank’s outlook is built around what it called an “AI in the fast lane, Middle East in the slow lane” environment, where artificial intelligence-related companies continue delivering strong growth while geopolitical tensions create broader economic uncertainty.

As part of its model, RBC reduced first-quarter 2027 consensus earnings expectations by 5%, while assuming profit growth of 28% for AI-focused businesses and 6% growth for the remainder of the S&P 500.

Its projections also assume consumer inflation of 3.3%, no additional Federal Reserve rate changes, and a 10-year Treasury yield of 4.5%.

According to RBC, if inflation rises to 3.8%, the Fed resumes tightening policy, and 10-year yields increase to 5%, the firm’s estimate of fair value for the S&P 500 would fall to between 7,400 and 7,500.

Potential drivers of a short-term market pullback include weaker earnings revisions tied to geopolitical conflict, profit-taking in semiconductor shares, uncertainty around U.S. midterm elections, and rising interest rates.

RBC said higher borrowing costs generally hurt stocks more through lower valuation multiples than through direct pressure on earnings.

The bank maintained its favorable view on Growth stocks compared with Value shares and continued to prefer U.S. equities over international markets.

Agentic Processing Seen as Main Driver of Future Growth

Citigroup expects the server CPU industry to expand dramatically over the next several years, projecting the market will grow from $29.3 billion in 2025 to roughly $132 billion by 2030.

The firm said much of that growth is expected to come from agentic CPUs, an emerging category tied to increasingly autonomous artificial intelligence workloads.

Citigroup estimates that general-purpose server CPUs will grow at a 20% compound annual growth rate and reach approximately $50.9 billion by 2030.

AI head node processors are forecast to increase at a 21% CAGR to around $21.1 billion during the same period.

Agentic CPUs are expected to post the strongest gains, with Citigroup projecting a 185% annualized growth rate that would expand the segment to roughly $59.4 billion by 2030.

Intel Expected to Hold Leading Position

The brokerage believes Intel (NASDAQ:INTC) will continue to lead the global CPU market by the end of the decade with an estimated 47% market share.

Advanced Micro Devices (NASDAQ:AMD) is projected to capture 34%, while Arm (NASDAQ:ARM) and other competitors are expected to account for the remaining 19%.

Citi Raises Targets on Intel and AMD

Citigroup raised its price target on Intel to $130 from $95 and maintained a buy recommendation on the stock.

The firm also lifted AMD’s target price to $460 from $358 while reiterating a neutral rating.

Cloud Providers Shift Focus Toward AI Deployment

Citigroup said Intel, AMD and Arm competitors are increasingly pursuing CPU-related opportunities as hyperscale cloud providers transition from spending heavily on AI training toward deploying AI systems commercially.

Chip Stocks Continue to Rally Strongly

Intel shares have surged roughly 195% year to date, while AMD has gained approximately 98% over the same period.

Goldman Sachs strategists said the U.S. dollar could be quietly building momentum for further gains, warning that a broader energy shock may hurt European growth prospects and support additional upside for the currency.

While the trade-weighted dollar has traded in a relatively narrow range in recent months, Goldman argued that the surface stability hides much larger moves across global currency markets. The bank identified two dominant forces — persistent energy disruption and growing AI-related demand — as key drivers reshaping terms of trade and creating wider differences in currency performance.

According to the strategists, those factors pull growth in different directions but both contribute to rising inflation, which fits with Goldman’s current macroeconomic outlook. “Our global growth expectations have been roughly stable since the middle of March, despite a longer conflict, while inflation projections have continued to drift higher,” the strategists wrote.

“The clearest risk for a stronger Dollar is if a wider energy shock begins to pressure growth, policy, and prospective returns in other developed countries, particularly Europe,” they said.

Goldman said the dollar’s recent sideways movement reflects a balance between stronger commodity-linked cyclical currencies and heavily managed Asian foreign exchange markets.

The strategists noted that official intervention in currencies including the yen and Indian rupee has capped dollar gains despite otherwise favourable fundamentals, though they warned that such intervention may not remain effective without a material shift in global macro conditions.

The bank also pointed to last week’s dollar rally following stronger U.S. inflation readings, which lifted global bond yields and illustrated how quickly the greenback can respond when macro risks intensify. Limited progress from the Trump-Xi summit and ongoing constraints in energy supply further highlighted the dollar’s relative defensive appeal, Goldman said.

If market risk appetite remains stable, Goldman expects the recent divergence in currency performance to continue, with commodity-exporting currencies outperforming while rate-sensitive importers remain under pressure.

To capture that theme while guarding against a disruptive market shock, the bank favours holding a basket of the Brazilian real, Hungarian forint, Mexican peso and South African rand against short positions in the euro, Swedish krona and Thai baht.

Goldman added that rising inflation alongside resilient growth has already driven bond yields higher, and warned that any extension of the energy shock “should continue to drive relative returns consistent with shifting terms of trade,” a trend the strategists believe would support broader gains for the U.S. dollar against major developed-market currencies.

JPMorgan lowered its 2026 gold price forecasts as short-term demand momentum weakened, although the bank maintained its broader bullish stance and continues to expect gold prices to approach $6,000 per troy ounce by year-end.

The Wall Street bank reduced its average 2026 gold price forecast to $5,243 per ounce from $5,708 previously, citing softer investor interest and lighter positioning across the market.

Gold is currently trading between its 200-day moving average near $4,340 per ounce and the 50-day moving average around $4,730 per ounce, while futures positioning and ETF inflows remain subdued.

“Gold is on the back burner for most investors at the moment,” analysts led by Gregory Shearer wrote, noting that concerns over possible Federal Reserve rate hikes in response to energy-related inflation pressures are weighing on short-term sentiment.

Even so, JPMorgan said the recent pullback should be viewed as a temporary pause rather than a lasting shift in trend. The bank said its bullish long-term thesis — driven by fiscal concerns, currency debasement risks, geopolitical fragmentation and uncertainty around U.S. policy — remains intact, but is “on hold until more clarity arrives around a resolution of the Iran conflict.”

A major catalyst the bank is monitoring is the potential reopening of the Strait of Hormuz, which JPMorgan’s energy analysts expect could happen in June. Analysts believe that outcome would ease inflation fears and help reverse recent gains in the U.S. dollar and real yields, allowing gold to recover toward resistance levels between $4,900 and $5,100 per ounce.

The bank also expects investors who previously reduced gold exposure to gradually return during the second half of the year, supporting renewed demand momentum.

JPMorgan lowered its estimate for central bank gold purchases in 2026 to 640 tonnes from 800 tonnes after officially reported net purchases slowed to 16 tonnes in the first quarter amid increased selling activity. Including unreported buying, however, total central bank demand still reached 244 tonnes during the quarter, according to estimates from the World Gold Council and Metals Focus.

The bank also cut its forecast for ETF inflows this year to roughly 400 tonnes from 580 tonnes previously, though it noted that global gold ETF holdings remain 108 tonnes higher year-to-date.

Analysts warned that the biggest threat to the outlook would be a scenario in which strong U.S. employment data and accelerating inflation force the Federal Reserve into an extended tightening cycle, potentially leading to sustained outflows from Western gold ETFs.

Hedge funds have been reducing exposure to U.S. semiconductor shares after the sector’s strong rally, taking profits while continuing to maintain significant positions tied to the artificial intelligence theme, according to analysis from Goldman Sachs cited by Bloomberg on Thursday.

Figures from Goldman Sachs’ prime brokerage division reportedly showed that semiconductor and semiconductor equipment companies represented the most heavily net-sold U.S. subsector over the past month. The selling activity mainly reflected investors scaling back bullish positions rather than aggressively increasing bearish bets against the industry.

As a result, the sector has shifted into net-selling territory for the year so far.

The move comes after a dramatic surge in chip-related stocks. Goldman’s basket tracking AI semiconductor companies has outperformed the S&P 500 by more than 50% this year, while the broader benchmark itself had risen more than 18% between late March and a recent three-session decline.

South Korea’s Kospi index, often viewed as an indicator of global demand for AI infrastructure, briefly climbed above the 8,000-point level for the first time in mid-May. The index had advanced more than 80% year-to-date before retreating sharply.

Goldman’s prime brokerage desk reportedly described the recent positioning changes as portfolio rebalancing rather than a sign of weakening confidence in artificial intelligence investments. The bank noted that overall exposure to U.S. AI-related stocks within its technology, media and telecommunications basket remains close to record highs.

At the same time, hedge funds have increased short positions in broader stock index and exchange-traded fund products as protection against wider market risks. According to the report, these hedging positions are now at their highest level in roughly a decade.

Goldman analysts also noted that gross leverage across hedge fund portfolios climbed to a fresh five-year high this month, while net leverage remained comparatively stable — a pattern the bank said differs from the type of speculative exuberance currently being seen among retail investors.

The Trump administration’s reported decision to award $2 billion in grants to leading quantum-computing companies marks one of the strongest signals yet that quantum technology has moved from experimental science into the realm of national strategic infrastructure.

According to a Reuters report citing the Wall Street Journal, the U.S. Department of Commerce is expected to distribute funding across nine companies, with major allocations going to IBM and GlobalFoundries, while firms including D-Wave Quantum, Rigetti Computing, and Infleqtion are also expected to receive substantial support.

What makes the initiative especially notable is the structure of the investment. The U.S. government is reportedly taking equity stakes in participating firms, expanding a strategy already used in semiconductor manufacturing and critical minerals. The move reflects growing concern in Washington over technological competition with China and the need to secure domestic leadership in emerging computing systems.

Quantum computing has long been viewed as a transformative technology capable of solving highly complex mathematical and optimization problems that classical computers struggle to process efficiently. Potential applications range from pharmaceutical discovery and financial modeling to logistics, cybersecurity, and advanced defense systems.

Yet the industry remains in an early and technically difficult phase. Current quantum systems still devote enormous computational resources to error correction, limiting practical large-scale deployment. That challenge has kept the sector largely speculative despite years of investor enthusiasm.

The latest federal backing could change that dynamic.

Government participation provides not only funding, but also validation. Markets responded immediately, with shares of several quantum-related companies reportedly rising between 7% and 21% in premarket trading following the news.

While much of the attention remains focused on hardware developers and chipmakers, the broader quantum ecosystem is beginning to attract increasing interest. Analysts are now watching companies involved in quantum software, infrastructure, cybersecurity integration, and specialized enabling technologies that could support commercial adoption over the next decade.

The larger companies are using different fundamental approaches to Quantum computation. Among the emerging names being discussed within the sector is Delta Gold Technologies (AQSE:DGQ) (USOTC:DGQTF), which is working with Penn State in the USA and University of Toronto, Canada on a new way to make the fundamental building block called a qubit. 

As government-backed investment accelerates across the quantum space, smaller and mid-stage technology firms connected to supporting architectures, data security, and next-generation processing environments may increasingly benefit from sector-wide momentum.

The administration’s investment strategy also underscores a broader shift in industrial policy. Rather than relying solely on private capital markets, Washington appears increasingly willing to act as a direct strategic investor in technologies considered vital to economic competitiveness and national security.

That approach could reshape the development timeline for quantum computing in the United States.

For decades, quantum research was largely confined to universities and specialized laboratories. Today, it is becoming a geopolitical priority, an industrial policy objective, and potentially one of the defining technology races of the next generation.

If the current funding wave succeeds in accelerating breakthroughs in stability, scalability, and error correction, the sector could move significantly closer to commercial viability. And as the ecosystem matures, companies operating adjacent to the core hardware layer, including firms like Delta Gold Technologies, may find themselves increasingly relevant participants in a rapidly expanding strategic industry.

Mitchells & Butlers (LSE:MAB) shares fell more than 5% on Thursday after the pub and restaurant group reported a sharp slowdown in recent like-for-like sales growth, despite first-half earnings broadly matching market expectations.

The company, which owns brands including Harvester, Miller & Carter and Toby Carvery, generated adjusted operating profit of £181 million for the 28 weeks ended April 11, unchanged from the same period last year.

The result was broadly in line with analyst expectations, compared with forecasts of £182 million from both Morgan Stanley and Visible Alpha consensus estimates.

Revenue increased to £1.49 billion from £1.45 billion a year earlier, although this came in slightly below analyst forecasts of between £1.50 billion and £1.51 billion.

Like-for-like sales rose 3.3% during the first half, supported by strong trading in the first quarter when growth reached 4.5%. However, momentum slowed during the second quarter, where comparable sales growth eased to 1.8%.

For the 30 weeks to April 25, like-for-like sales growth stood at 3%.

The company said growth slowed further to just 1.1% in the most recent three-week period, attributing the weaker performance to “a strong prior year comparative, which benefited from favourable weather alongside some indications of macroeconomic pressures and, more recently, disruption from tube strikes.”

Adjusted earnings per share came in at 17.4 pence, slightly ahead of Morgan Stanley’s forecast of 17.1 pence but below the Visible Alpha consensus estimate of 17.8 pence.

Adjusted pre-tax profit totaled £139 million, compared with analyst estimates ranging from £138 million to £143 million.

Adjusted EBITDA reached £256 million, exceeding both Morgan Stanley’s £254 million estimate and the Visible Alpha consensus forecast of £251 million.

The group’s adjusted operating margin narrowed by 0.3 percentage points to 12.1%.

“The company puts weakness down to unhelpful weather, tube strikes and some broader macro uncertainty, but sounds upbeat on the outlook. We currently model FY26e LfL sales +3.5% which implies an improvement to +3.7% in H2, which looks a tad ambitious,” Morgan Stanley said.

Mitchells & Butlers said full-year cost headwinds are now expected to total around £120 million before mitigation measures, equivalent to roughly 5.5% of the company’s cost base and around £10 million lower than previous guidance.

Management added that approximately 60% of those cost pressures are expected to fall within the first half of the financial year.

Looking ahead to fiscal 2027, the company expects annual cost headwinds before mitigation to moderate to around £95 million, representing approximately 4% of the cost base.

Net debt excluding leases fell to £747 million from £860 million a year earlier.

Cash inflow before bond amortisation totaled £98 million compared with £131 million in the prior-year period, while capital expenditure increased to £117 million from £92 million.

Mitchells & Butlers currently operates 1,712 locations across the UK and Germany, including 1,638 directly managed sites.