Major indices are mixed but off their session lows. The S&P 500 and Nasdaq are both benefiting from their higher weights in semiconductors and the magnificent seven, which are both seeing strength. Alphabet (GOOG/L) is leading the magnificent seven after reports that they are developing a new server chip, called Frozen v2, designed around Gemini to make it more efficient.

The strength in Alphabet is helping Communication Services (XLC) to be in the lead. Meanwhile, the strength in Technology (XLK) is largely due to semiconductors getting a boost from Advanced Micro Devices (AMD) which is surging after reports that it is expanding its partnership with Microsoft (MSFT) to deploy their next generation AI chips across Azure. Meanwhile, the more defensive sectors of Consumer Staples (XLP) and Real Estate (XLRE) are at the bottom of the leaderboard.

Middle East Update

Oil is holding above the $80 level following further skirmishes over the weekend but has given back some early morning gains after reports that there is a proposal to stop the fighting.

Additionally, on the Middle East front, the Houthis and Saudis have seen some recent clashes which has led to Houthi leadership threatening to close the Bab al-Mandab Strait. However, their ability to effectively do so is questionable.

AI Headlines

On the AI front, Kimi K3 received more demand than anticipated and the company is now limiting new subscriptions as compute becomes constrained.

Late last week, there were reports of a potential Finra-like agency to vet top AI models in an attempt to standardize rules and offer more certainty to frontier AI labs on what can be released. This comes following last month’s temporary export controls on Anthropic’s Fable and Mythos models.

Earnings season is heating up this week, with many notable earnings reports being released. Two Magnificent Seven companies are reporting on Wednesday after the bell: Alphabet (GOOG/L) and Tesla (TSLA).

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