Gold hits new highs, oil surges, semiconductors rebound: What are U.S. stocks pricing in ahead of CPI?

Brief recap of Tuesday's market action

: The three major indices opened higher but closed lower, marking their second consecutive day of declines. Market sentiment was cautious as investors awaited Wednesday’s release of July CPI data. Among S&P 500 sectors, eight declined while three advanced; communication services fell 2.12%, leading the losses, while energy rose 1.06%, outperforming other sectors.

Today, we focus on two key developments: first, recent adjustments in tech stocks triggered by NVIDIA and Wall Street institutions jointly launching a $500 billion AI infrastructure financing initiative, reigniting market concerns over circular financing; second, why gold has risen sharply despite surging oil prices, and whether it has already entered the right-side phase.

I. NVIDIA’s Circular Financing Sparks Tech Stock Correction

Recently, tech stocks have faced two major headwinds. First, NVIDIA has partnered with six Wall Street financial giants—Apollo Global Management, Blackstone, BlackRock, Brookfield, Goldman Sachs, and KKR—to establish an AI infrastructure financing platform aiming to mobilize over $500 billion in third-party capital. Following the announcement, NVIDIA’s stock closed down 2.86% that day. Second, Intel is also considering increasing its equity offering from the previously planned $15 billion to $20 billion, causing its shares to drop 4% on the same day. These two financing plans have once again intensified market worries about circular financing in the AI sector.

In fact, a similar scenario played out at the end of July. Back then, NVIDIA and SK Group announced a $500 billion partnership, coupled with NVIDIA’s plan to provide a $250 billion financing guarantee for OpenAI. NVIDIA’s stock plunged nearly 5% at the time, dragging down a host of semiconductor stocks.

Both episodes fundamentally reflect market concerns about the quality of earnings across NVIDIA and the broader upstream AI supply chain: are upstream revenues driven by genuine downstream demand or merely by circular financing? NVIDIA CEO Jensen Huang has directly addressed this issue, firmly denying external accusations of 'circular financing' and emphasizing that computing power has now become infrastructure as essential as electricity and the internet.

This issue must be understood within the context of the broader AI capital expenditure cycle. The core problem lies in the mismatch between AI-related capital spending and profit growth. The so-called 'Magnificent Seven' downstream tech giants have already demonstrated through their earnings reports that AI is generating substantial profits, with very rapid revenue growth—albeit still slower than the pace of capital expenditure, resulting in negative free cash flow. Nevertheless, companies continue to ramp up capital spending because they are already seeing tangible profitability from AI investments.

In my view, the core risk of NVIDIA’s so-called circular financing does not lie in the authenticity of orders but rather in the sustainability of the financing itself. The biggest risk stems from tightening funding conditions: higher debt costs increase corporate expenses, which in turn require even higher returns on capital, potentially undermining the profitability of AI’s downstream applications. Fortunately, this issue has not yet impacted capital expenditure—debt offerings from tech giants like Microsoft, Google, and Amazon have all received multiple times their subscription amounts, as the market still regards these tech corporate bonds as high-quality assets.

Based on fundamentals, I remain firmly bullish on AI over the long term. There will certainly be short-term volatility along the way, but as long as the underlying trend remains intact, the market will naturally correct any temporary dislocations. From a positioning standpoint, I’m maintaining my 77% allocation to U.S. tech stocks—a level I’m comfortable with at current prices. Short-term consolidation and adjustments are unsurprising; staying calm is the best approach.

II. Gold Strengthens Despite Surging Oil Prices

Gold’s recent performance has been noteworthy, rallying against the tide to break above $4,400 despite a sharp rise in oil prices. The oil rally is primarily driven by U.S.-Iran geopolitical uncertainty, with markets growing increasingly skeptical about the prospect of a durable near-term resolution. Iran stated it is nearing an agreement with Oman to reopen the Strait of Hormuz, but Tehran continues to insist it will not engage in direct negotiations with the United States until several conditions are met.

Gold has strengthened counter-trend, possibly absorbing capital flowing out of tech stocks—much like how gold remained persistently weak during the prior tech rally. After a prolonged adjustment of over half a year, gold has seen thorough bottom-position turnover, with clear support levels and very high long-term allocation value. Recently, the surprisingly weak nonfarm payrolls data and market expectations ahead of the CPI release have objectively accelerated this move. Most Wall Street institutions expect the CPI to show signs of cooling, raising the possibility that gold prices may be front-running the CPI data.

Regarding specific positioning, I remain confident in gold’s long-term value and maintain my baseline outlook on interest rate policy this year: no rate hikes or cuts; optimistically, one rate cut; pessimistically, one rate hike. The current path of rates remains within this forecast range. On execution, I’ve repeatedly highlighted the long-term allocation opportunity near the $4,000 level previously. Gold positions have since appreciated significantly, and after further gains, it may be time to take partial profits—not because I’m bearish on its long-term value, but because disciplined position management must be enforced.

During the sharp tech sell-off in July, many investors likely felt firsthand the importance of position management: be bold adding positions at lows, and be willing to take profits at highs. Money on the table isn’t really yours—only what you’ve taken off the table and put in your pocket truly belongs to you.

That’s all for today. Please feel free to like, comment, and follow—thank you for your support!

Risk Disclaimer: The above content represents personal views only and does not constitute investment advice. The market involves risks; please invest prudently.

#NVIDIA #NVDA #CPI #Gold

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