US Stocks Extend Highs as Traders Await US-Iran Deal | The Close 5/29/2026

Key Concepts

• AI Infrastructure Buildout: The massive capital expenditure (capex) cycle driving demand for servers, chips, and data centers.
• "Buy AI and Ride the Wave": The prevailing investment strategy replacing the old "Sell in May and go away" adage.
• Powered Industries Ecosystem: A framework describing the intersection of data centers, advanced manufacturing, power capacity, and supply chains.
• Emerging Markets (EM) Outperformance: The thesis that EM stocks are undervalued and benefit from AI infrastructure growth (e.g., Taiwan Semiconductor, South Korean chipmakers).
• Active ETF Revolution: The shift of legacy mutual fund giants (Capital Group, JP Morgan, etc.) into the ETF space to capture flows.
• SpaceX IPO: The highly anticipated public offering of the space exploration company, featuring a complex multi-class share structure and high valuation.

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1. Market Performance and Trends

• Record-Breaking Run: The S&P 500 achieved its ninth consecutive weekly gain, the longest streak since 2023. The index is up nearly 20% from its Iran-war lows.
• Tech Dominance: The NASDAQ rose nearly 10% in May, driven by "Retro Tech" and AI-adjacent hardware companies.
• VIX and Sentiment: The VIX index dropped to the 15-handle, signaling a significant reduction in market anxiety compared to the 31-handle seen in late March.
• Sector Divergence: On the final trading day, only Tech and Financials finished in the green, while nine other sectors declined, highlighting the narrow breadth of the current rally.

2. Key Corporate Movers and Case Studies

• Dell Technologies: Shares soared 33% after reporting blowout earnings fueled by AI server demand. The company projects $167 billion in revenue by 2027, with $60 billion specifically from AI servers.
• NetApp: Shares climbed 22% to record highs, with the CEO noting an acceleration in large enterprise AI transactions (from 400 to 500 in the final quarter).
• Ford: Experienced its best monthly performance since the financial crisis (+40% in May), driven by investor enthusiasm for its potential as an "AI-adjacent" energy storage play.
• Gap Inc.: Suffered a 15% decline due to a weak sales outlook, specifically citing poor performance at Old Navy.
• Anthropic: A new funding round valued the company near $1 trillion, adding seven founders to the Bloomberg Billionaires Index—the largest single-day addition in the index's history.

3. The "Powered Industries" Framework (Texas Case Study)

Lisa Denite (Newark) explained that the AI buildout is not just a software story but an industrial real estate one. Texas serves as the primary case study for a "Powered Industries Ecosystem" consisting of four layers:

1. Data Centers: The primary demand driver.
2. Advanced Manufacturing: Needed to produce the physical components (racks, chips, servers).
3. Power Capacity: Texas has more natural gas power capacity under development than the next seven states combined.
4. Cross-border Supply Chains: Essential for the logistics of the infrastructure buildout.

4. Investment Strategy and Perspectives

• Michael Arone (State Street): Argues that current market gains are supported by fundamentals, noting that cumulative earnings growth (80%) is closely tracking total returns (85%) over the last five years, unlike the 1999 bubble.
• Veronica Willis (Wells Fargo): Advises investors to trim energy/commodity gains and rebalance into Tech. She warns against consumer-driven sectors (discretionary/staples) due to inflation concerns.
• Eric Balchunas (Bloomberg Intelligence): Highlights the "Empire Strikes Back" phenomenon where active mutual fund managers are successfully pivoting to ETFs to stem outflows, though they still face a massive market share gap against BlackRock and Vanguard.

5. Geopolitical Context: US-Iran Ceasefire

• Status: The US and Iran are tentatively extending a fragile ceasefire by 60 days.
• Political Pressure: Sarah Bianke (Evercore ISI) notes that the President is under pressure to secure a deal to stabilize energy prices before the primary season, despite criticism from hawkish allies.
• Market Impact: The equity market has largely ignored the geopolitical uncertainty, pricing in a resolution or "peace" scenario.

6. Notable Quotes

• "The old market rules would have suggested to sell in May and go away. But in today's market, the smarter play may be buy AI and ride the wave." — Michael Arone.
• "Every single data center that is coming online has a supply chain supporting it... it requires industrial real estate to support it." — Lisa Denite.
• "It's better to save some clients than lose them all." — Eric Balchunas, regarding legacy firms entering the ETF space.

7. Synthesis and Conclusion

The market is currently defined by a "melt-up" driven by AI-related earnings and infrastructure spending. While geopolitical tensions (Iran) and macroeconomic concerns (inflation/consumer spending) persist, investor sentiment remains bullish, prioritizing AI-adjacent growth over traditional defensive positioning. The upcoming week will shift focus from earnings to economic data, specifically the US jobs report and Fed commentary, which will test the market's resilience against potential volatility.