The CPU Comeback

👋 ICYMI

The S&P 500 and Nasdaq both finished Friday at fresh all-time highs as a combination of ceasefire extension, strong earnings, and falling oil kept the rally alive.

The week began on a nervous note as Iran closed the Strait of Hormuz again over the weekend after the U.S. refused to lift its naval blockade — ending the brief reopening that had sparked Friday's massive rally. The Nasdaq snapped its 13-day winning streak — its longest since 1992 — on Monday's modest pullback. Then on Tuesday evening, after talks in Islamabad collapsed, Trump unilaterally extended the ceasefire indefinitely, saying Iran's government is "seriously fractured". The S&P 500 surged to a new record on Wednesday before pulling back Thursday on earnings disappointments in software.

The story of the week, however, was Intel $INTC ( ▲ 23.6% ) . The stock surged 23.6% on Friday — its biggest single-day move in years — after reporting Q1 earnings of $0.29 per share versus a consensus of $0.01 and revenue of $13.6 billion that beat estimates by $1.2 billion. CEO Lip-Bu Tan declared that "the CPU is reinserting itself as the indispensable foundation of the AI era" as data centre revenue jumped 22%. Intel shares hit an all-time high, surpassing their 2000 dot-com peak. AMD rallied nearly 14% in sympathy.

🔁 Market Movers

• 💻 Intel's 2,800% Earnings Beat Rewrites the Narrative

  Intel reported adjusted EPS of $0.29 versus $0.01 expected — a 2,800% beat — with revenue of $13.6 billion smashing the $12.4 billion consensus by roughly 9%. Data centre and AI revenue rose 22% to $5.1 billion as agentic workloads shift compute needs toward CPUs. Gross margins expanded to 41%. Intel guided Q2 revenue to $13.8–$14.8 billion, well above the $13.1 billion estimate. The stock surged 23.6% to $82.57, hitting an all-time high. It's now up over 100% year to date.

• 🕊 Ceasefire Extended Indefinitely — Strait Still Contested

  Trump extended the U.S.-Iran ceasefire indefinitely after Pakistan-mediated talks in Islamabad collapsed. The Strait of Hormuz remains contested — Iran re-closed it after the U.S. refused to lift its naval blockade, and only about six ships transited on Wednesday. Oil settled near $83 for the week, well off the $112 highs from March. The market has largely moved on from the war — "The war with Iran is now in the rearview mirror for the market," said Aptus Capital's David Wagner.

• 🚗 Tesla Beats on Earnings, Misses on Revenue

  Tesla $TSLA ( ▲ 0.69% ) reported Q1 adjusted EPS of $0.41 versus $0.37 expected, with gross margins jumping to 21.1% — a 478 basis point improvement year over year and the strongest margin in over a year. However, revenue of $22.39 billion came in slightly below the $22.64 billion consensus, and capex guidance was raised to $25 billion for 2026, up $5 billion from prior guidance. Shares initially rose 4% after hours before giving back gains on the spending increase. Energy storage revenue fell 12% year over year.

• 📉 ServiceNow Crashes 18% — "SaaSpocalypse 3.0"

  ServiceNow $NOW ( ▲ 6.36% ) shares plunged nearly 18% on Thursday after reporting that subscription revenue growth was hindered by the Middle East conflict, rattling the broader software sector. IBM $IBM ( ▲ 0.39% ) fell over 7% despite beating on the top and bottom lines after maintaining rather than raising full-year guidance. The selloff reinforced the widening gulf between AI hardware winners and software names struggling to prove near-term monetisation.

• 🏦 Earnings Season Running Above Average

  With 10% of S&P 500 companies having reported, both the earnings surprise rate and magnitude are above recent averages. Revenue growth of 9.9% would mark the highest since Q3 2022. Financials led the beats, with JPMorgan $JPM ( ▼ 1.09% ) , Goldman $GS ( ▼ 0.47% ) , Wells Fargo $WFC ( ▼ 1.35% ) , BofA $BAC ( ▼ 0.8% ) , Morgan Stanley $MS ( ▼ 0.31% ) , and Citi $C ( ▼ 0.41% ) all exceeding expectations. Analysts are projecting 18% full-year 2026 earnings growth. Next week: 93 S&P 500 companies report, including 7 Dow components.

👀 Signals I'm Watching

• 🧠 The CPU Renaissance Is Real

  Intel's results were not a one-off. The thesis is that agentic AI workloads — which require reasoning, orchestration, and inference at the edge — need CPUs in ways that training workloads didn't. Intel CEO Lip-Bu Tan said on the earnings call that AI-related businesses now constitute 60% of Intel's revenue and grew 40% year over year. If this trend holds, it broadens the AI investment opportunity well beyond Nvidia and into a much larger ecosystem of CPU, networking, and infrastructure companies.

• 📊 Wall Street's Year-End Target: 7,650

  The median year-end S&P 500 target among 21 major banks sits at 7,650 — implying roughly 7% upside from current levels. Oppenheimer is the most bullish at 8,100; Bank of America the most cautious at 7,100. At current levels, the forward P/E ratio is 20.9x — above both the 5-year (19.9x) and 10-year (18.9x) averages. The market isn't cheap, but it's being supported by 18% expected earnings growth.

• ⚠️ Software vs Hardware Divergence Is Accelerating

  Intel up 23%. ServiceNow down 18%. In the same week. The market is brutally sorting AI winners from names that haven't yet demonstrated revenue impact from AI spending. Software stocks are now down roughly 20% year to date while semis and infrastructure names are at record highs. This isn't a sector rotation — it's a reclassification of what "AI stock" actually means.

• 🛢 Oil Is Becoming Less of a Market Driver

  Brent crude settled near $83 on Friday, down from $112 at the peak of the crisis six weeks ago. The market is increasingly treating the Iran conflict as contained — or at least as something it can look past. That said, the Strait remains contested, the U.S. blockade is still active, and physical shipping hasn't normalised. A re-escalation could still disrupt this narrative quickly.

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— George

⚠️ Red Flag to Note

The Market Is Pricing Perfection — And Earnings Must Deliver

The S&P 500 is at all-time highs with a forward P/E of 20.9x, above both its 5-year and 10-year averages. Analysts are calling for 18% earnings growth in 2026. This week showed what happens when companies don't deliver — ServiceNow dropped 18% on a slight growth miss, and IBM fell 7% despite beating estimates but failing to raise guidance. With 93 companies reporting next week, the margin for error is razor thin. The market is rewarding upside surprises and punishing even modest disappointments with extreme moves. At these valuations, earnings need to not just meet expectations — they need to exceed them convincingly.

🔍 Insider Transactions I’m Watching

📬 Closing Note

Eight weeks ago, the S&P 500 was in correction territory. The Dow was at its lowest since October. Gold was crashing. Oil was above $112. And the question on every investor's mind was whether the Iran war would tip the economy into recession.

Today, every major U.S. index is at or near record highs. Oil is back below $85. Earnings season is running ahead of expectations. And Intel — a company that was left for dead eighteen months ago — just posted its best day in years and hit an all-time high, surpassing levels not seen since the dot-com bubble.

Markets have a way of humbling both the bulls and the bears. The bears were right that the war would create real economic pain — gas above $4, consumer sentiment at record lows, inflation re-accelerating. But the bulls were right that corporate earnings would hold, that AI demand would strengthen, and that the market would look through the conflict faster than most expected.

The lesson, as always, is that the market doesn't wait for certainty. It prices the future before it arrives. The investors who stayed positioned through the worst of March are now sitting on one of the strongest recoveries in recent memory.

The ceasefire is still fragile. Software is being repriced. Valuations are stretched. There are plenty of reasons to be cautious. But there are also 93 S&P 500 companies reporting next week, an earnings growth rate running near 18%, and an AI infrastructure boom that's broadening from GPUs into CPUs, networking, and edge computing.

Stay patient. Stay selective.

Until next Sunday —

George ☕