Hedgie's Market Edge - June 1, 2025

Hey everyone, Hedgie here! Welcome to this week's market breakdown. What a week it's been! We saw some fantastic earnings results from the tech giants, but tariff headlines continue to create uncertainty. I'm going to walk you through everything that happened and explain what it means for your investments. The big story this week was how corporate earnings, particularly in technology, helped offset ongoing trade policy concerns.

The S&P 500 had a strong week, gaining 1.88% and pushing the index to 5,912. The Dow climbed 1.6% to 42,270, while the Nasdaq led the way with a 2.01% gain to 19,114. For the year, we're seeing mixed results with the S&P 500 slightly positive at 0.5%, the Dow down 0.6%, and the Nasdaq down 1.0%. The Russell 2000 also participated in the rally, advancing 1.3% for its seventh positive week in eight.

However, as I'm writing this Sunday evening, stock futures are pointing to a weaker start for Monday, with S&P 500 futures down 0.3%, Nasdaq-100 futures also declining 0.3%, and Dow futures off 108 points. This pullback after such strong May performance isn't entirely surprising, as markets often consolidate after significant gains.

Note: This newsletter was prepared Sunday evening for Monday morning release. Market conditions and futures may have changed by the time you're reading this.

MAY'S REMARKABLE PERFORMANCE SETS THE STAGE

Before diving into this week's earnings and policy developments, let's appreciate just how remarkable May's performance was. The S&P 500 climbed 6.15% for the month, breaking a three-month losing streak with its best monthly performance since November 2023. The Nasdaq was even more impressive, surging 9.56% for its best month since November 2023 and second positive month in a row. Even the Dow, often seen as more conservative, rose 3.94% to break its own three-month losing streak.

The Russell 2000 small-cap index gained 5.2%, also breaking a three-month losing streak with its best performance since November 2024. This broad-based strength across market capitalizations suggests the rally wasn't just driven by a few large technology stocks, but reflected genuine optimism about corporate prospects.

TECH EARNINGS SEASON DELIVERS STRONG RESULTS

NVIDIA Leads the Charge Despite China Headwinds

The biggest story this week was NVIDIA's earnings report, which showed just how resilient the AI revolution remains despite geopolitical challenges. The company exceeded both revenue and earnings estimates and grew its data-center business by an impressive 73%. This growth came even as NVIDIA faces trade restrictions in China, proving that global demand for AI infrastructure remains incredibly strong.

What really caught my attention was how NVIDIA emphasized that demand from major technology customers like Microsoft, Meta, and Amazon continues to drive their data-center revenues. This isn't just about one company doing well - it's about an entire ecosystem of AI investment that's creating a virtuous cycle of growth.

The $330 Billion AI Investment Commitment

Speaking of that ecosystem, we got confirmation this week that four tech giants - Microsoft, Meta, Google, and Amazon - have reaffirmed their capital expenditure plans for north of $330 billion this year. That's not a typo. These companies are collectively spending more than the GDP of many countries on AI infrastructure and development.

This massive investment commitment tells us several important things. First, these companies see AI as a fundamental shift, not a passing trend. Second, they're willing to sacrifice short-term profits for long-term positioning. Third, the competitive dynamics in AI are so intense that none of these companies can afford to fall behind.