markets

Matt Phillips7/1/25

AI trade down after Senate scraps ban on state regulation

The AI trade sputtered Tuesday after the Senate voted almost unanimously to strike a provision in the Republican budget bill that would have blocked states from regulating artificial intelligence.

Only Senator Thom Tillis voted to keep the amendment, which would have stopped states from receiving their portion of a new $500 million AI investment fund if they moved to regulate AI.

At first glance, it seems like there was at least some expectation in the market that AI might be able to avoid such state rules. AI-related software stocks including Meta, Palantir, and Cloudflare dropped Tuesday, as did AI data center trades like chip giants Nvidia, Advanced Micro Devices, and Broadcom.

It’s also possible that some rejiggering of portfolios after the end of Q2 might have something to do with today’s slump as well.

Senate strikes AI provision from GOP bill after uproar from the states

Senate strikes AI provision from GOP bill after uproar from the states

At first glance, it seems like there was at least some expectation in the market that AI might be able to avoid such state rules. AI-related software stocks including Meta, Palantir, and Cloudflare dropped Tuesday, as did AI data center trades like chip giants Nvidia, Advanced Micro Devices, and Broadcom.

It’s also possible that some rejiggering of portfolios after the end of Q2 might have something to do with today’s slump as well.

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Cadence Design Systems jumps after Q4 earnings, 2026 profit outlook and sales backlog exceed estimates

Cadence Design Systems jumped in after-hours trading on Tuesday, briefly erasing the day’s big losses after posting better-than-expected Q4 earnings, a bigger pipeline of future business, and a solid profit outlook for 2026.

For Q4, the electronic design automation company reported:

Sales: $1.44 billion (estimate: $1.42 billion)
Adjusted earnings per share: $1.99 (estimate: $1.91)
Remaining performance obligations (RPOs) of $7.8 billion (estimate: $7.25 billion)

Management said that 2026 adjusted earnings per share would range between $8.05 to $8.15, above the consensus call for $8.03.

In recent weeks, investors have worried that Cadence’s software business, which is used by chip designers, could suffer competitive pressure from AI tools. At the very least, that RPO figure says there’s billions of dollars standing between Cadence and any more disrupted future.

Infleqtion CEO Matt Kinsella on how the newly-public quantum computing company is “following in the footsteps of Nvidia”

Infleqtion shares gained double digits in their opening session, while peers sold off.

US-AI-SCIENCE-NVIDIA

Tasha Matsumoto

Stocks erase morning losses in volatile trading session

The S&P 500 posted a small gain, the Nasdaq 100 posted a small loss, and the Russell 2000 finished flat.

Josh Giddey #3 of the Chicago Bulls grabs a rebound during the second half against the Detroit Pistons on October 22, 2025 at the United Center in Chicago, Illinois.

Max Knoblauch2h

Oil prices dip, sending airline stocks climbing amid US-Iran talks

An agreement between the US and Iran on a “set of guiding principles” following talks between officials from the two countries on Tuesday is sending oil prices lower. That, in turn, is boosting airline stocks.

West Texas Intermediate crude futures were down 1.1% Tuesday afternoon. Shares of airlines, including United Airlines, American Airlines, Alaska Air, JetBlue, and Delta Air Lines were up.

Southwest Airlines, which also received an upgrade to “buy” and a price target hike to $73 from $51 by UBS on Tuesday morning, was up more than 7%.

Iran said it temporarily closed the Strait of Hormuz for live fire drills on Tuesday as the talks began. About 20% of the world’s oil passes through the key choke point waterway. Later in the day, however, Iran’s foreign minister expressed optimism that a deal could be reached with the US, saying “a new window has opened.”

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Walmart’s earnings have high bar to clear as search for safety pushes valuations into stratosphere

If recent history is any guide, Walmart’s Q4 earnings release Thursday before the bell will be appointment viewing.

This time last year, it wasn’t the DeepSeek freak-out or tariff chatter that caused the S&P 500 to definitively begin its downturn from all-time highs. It was Walmart’s underwhelming full-year guidance that catalyzed a momentum stock meltdown.

Since then, the retail behemoth has become a more important — and richly valued — part of the S&P 500, joining the trillion-dollar market cap club in the process. Investors have clamored for safety within the US stock market in 2026, and that’s meant bidding up the income streams associated with moving loads of volume at everyday low prices.

Jeff Jacobson, head of derivatives strategy at 22V Research, offers some perspective on just how well things have been going for the Bentonville-based giant:

Walmart versus the SPDR S&P 500 ETF is at its highest level since the aftermath of the global financial crisis;
The implied volatility of calls that offer exposure to additional upside in Walmart is very elevated relative to history (that is, they’re expensive);
This is the only time in the past five years where Walmart has traded above Wall Street’s 12-month price target.

That makes the bar to clear, regardless of how the actual numbers and guidance end up, fairly high.

In Jacobson’s view, it would be prudent for Walmart holders to try to take advantage of this elevated implied volatility by selling upside, or attempting to lock in gains after this hot run.

His recommendations:

Covered calls: sell April $145 calls at $3 or better.
Collar the position: sell WMT May $155 calls, buy May $125 put, sell May $110 put.

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