US-Iran Impasse Fails to Stall AI Rally| Insight with Haslinda Amin 06/03/2026

Key Concepts

• AI-Driven Market Rally: The primary driver of global stock market performance, characterized by massive capital expenditure (CapEx) in hardware, data centers, and AI applications.
• Section 301 Tariffs: Proposed US trade measures (10%–12.5% levies) targeting major economies based on forced labor investigations.
• Geopolitical Deadlock: The ongoing conflict involving Iran, Israel, and the US, impacting energy security and ceasefire negotiations.
• "China Plus One" Strategy: A manufacturing shift where companies diversify supply chains away from China to countries like Vietnam, Malaysia, and India.
• Digital Infrastructure Build: The rapid expansion of GPU clouds and data centers across Southeast Asia (Thailand, Malaysia, Indonesia).
• Macro-Dispersion: The divergence in market performance between AI-hardware leaders (Japan, Taiwan) and developing economies (Vietnam, Indonesia) sensitive to trade shocks.

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1. Market Dynamics and AI Rally

Asian markets are reaching record highs, primarily fueled by the AI trade.

• Hardware Dominance: Investors are prioritizing markets with AI hardware leadership (Taiwan, Japan) over those lacking such infrastructure.
• Resilience: The AI trade has shown remarkable resilience, often ignoring macro shocks like rising oil prices or geopolitical tensions.
• Baidu’s Performance: Baidu CFO Luo Rong reported that AI-related revenue exceeded 50% of total revenue this quarter, highlighting the success of their "full-stack" capabilities (chips, cloud, foundation models, and applications).

2. US Trade Policy: Section 301 Tariffs

The US Trade Representative office has proposed tariffs of at least 10% on imports from 60 economies, including China, India, Japan, South Korea, Brazil, and Switzerland.

• Rationale: The US claims these economies utilize labor practices that disadvantage American workers.
• Timeline: Written comments are due by July 6, with public hearings beginning July 7.
• Market Impact: While AI-heavy markets remain resilient, developing economies like Vietnam and Indonesia have seen immediate negative reactions, as they rely heavily on US export growth.

3. Geopolitical Conflict: The Iran-Israel-US Triangle

The conflict remains a significant source of global instability, complicating energy markets and ceasefire talks.

• Diverging Aims: Former Secretary of State Mike Pompeo argues that the Trump administration’s strategy of "maximum pressure" has weakened Iran’s nuclear and missile programs. He dismisses the idea that Israel is obstructing a deal, framing the conflict as a necessary defense of Western interests.
• Turkish Perspective: Turkish Foreign Minister Hakan Fidan expressed skepticism regarding Israel’s intentions, noting that while the US and Iran appear sincere about a ceasefire and reopening the Strait of Hormuz, Israel’s military actions in Lebanon threaten to derail negotiations.

4. Deal-Making and IPO Landscape

The global deal-making space is undergoing a transformation driven by "mega-offerings."

• SpaceX IPO: SpaceX is reportedly targeting a $75 billion valuation for its IPO, which would be the largest in history, surpassing Saudi Aramco.
• Regional Trends: Nomura’s Joelan Nanovati notes that the current deal-making environment is the strongest in 3–4 years. Key themes include:
  • Cross-border M&A: Significant activity from Japan into India.
  • Digital Infrastructure: Massive investment in data centers across Southeast Asia (Johor, Thailand, Indonesia).
  • India’s Outlook: While international investors have been cautious due to currency depreciation, domestic savings and long-term growth potential keep the market structurally bullish.

5. Synthesis and Conclusion

The global economy is currently defined by a "confusing reality": a robust, AI-driven productivity boom occurring simultaneously with multiple macro shocks (energy crises, trade tariffs, and regional wars).

Key Takeaways:

• AI as a "Step Function": AI is viewed as a general-purpose technology (like electricity) that justifies high CapEx. The sustainability of this rally depends on whether these investments translate into visible, real-world earnings growth in the coming quarters.
• Macro Sensitivity: While AI-tech leaders are currently immune to trade and energy shocks, developing nations remain highly vulnerable to US tariff policies and currency volatility.
• Strategic Outlook: The "China Plus One" manufacturing shift and the build-out of digital infrastructure in Southeast Asia are the most significant structural trends for the region, providing a buffer against broader geopolitical instability.