Morning brief: the chip selloff that rattled Wall Street

A Chinese AI model turned into Wall Street's worst problem this week. Friday closed lower across the board and lower on the week: the S&P 500 ended at 7,457.69 (−1.0%), the Nasdaq at 25,520.24 (−1.4%), the Dow at 52,146.42 (−0.8%). The trigger was chips. A little-known Chinese startup, Moonshot AI, put out a model it claims narrows the gap with the top US systems — and investors read that as a threat to the American chipmakers whose sales the whole AI trade rests on. The Philadelphia Semiconductor Index (the "SOX", the main gauge of chip stocks) has now dropped more than 13% in a month — not a crash (it's still up around 63% for the year), but a real wobble after months of the chip trade only going up. Energy was the one sector that rose, with oil ticking higher as Middle East tension flared again.

Inflation came in soft — but the Fed isn't taking the win. June's Consumer Price Index, released Tuesday, showed prices up 3.5% over the year and actually down 0.4% on the month — the biggest monthly drop since April 2020, mostly because gasoline fell 9.7% in June. Core inflation (which strips out food and energy — the bit the Fed watches for the underlying trend) eased to 2.6%. Good news for anyone worried about prices; less so if you were hoping for cheaper borrowing. New Fed chair Kevin Warsh has said plainly that "prices are too high," and markets have barely moved off expecting no change: the CME's FedWatch tool puts roughly an 89% chance on rates staying at 3.50–3.75% at the 29 July meeting. For savers that cuts both ways — rates held high is what keeps the interest on uninvested cash at brokers up, too.

Netflix did everything right and the stock fell anyway. Thursday's numbers were fine: Q2 revenue of about $12.56 billion, up 13%, and margins in line. What spooked the market was the road ahead — Netflix guided Q3 revenue to roughly $12.86 billion (up ~11.7%), a shade under the ~$13 billion analysts wanted, and narrowed its full-year range to $51–51.4 billion. The shares dropped about 8.5% after hours. The company also said it will report fewer engagement figures from now on — less for outsiders to pick over each quarter.

Apple, meanwhile, hit a record. The shares closed at an all-time high Friday, pushing Apple's market value to around $4.9 trillion, after HSBC upgraded it to "buy" and lifted its price target to $366 from $260, citing the coming AI features and product cycle. So the same week the chip names sold off, the biggest customer of those chips set a record. (Which one you'd want is your call, and none of this is advice.)

Morgan Stanley just undercut the crypto brokers on price. It finished rolling out crypto trading on E*Trade this week at a 0.50% fee — notably below the up-to-0.95% that Coinbase and Robinhood charge retail. It's a US-only product for now. This is a mainstream broker treating crypto as a normal, priced-to-compete line item rather than a novelty.

And what we're watching. The Fed decides on 29 July — the first read on whether a soft inflation month changes anything (our take on that print, asterisks and all, is in the inflation-relief piece). A Czech deadline lands the same week: Polymarket goes on the blocked-gambling register and providers have until roughly 28 July to actually cut it off — we mapped the gap between "banned" and "blocked" across nine countries here. And Revolut's USDT delisting starts in August, with balances sold automatically if holders do nothing — the details are here.

That's the brief. Sources below, as always — this is a summary of what was published, not investment advice.