Investors weigh softer US inflation, strong chip demand and fresh corporate results as geopolitical risks remain in the background

ASML Strengthens the AI Investment Case

ASML has given investors another reason to believe the artificial intelligence investment cycle still has momentum.

The Dutch semiconductor equipment giant raised its 2026 revenue outlook after reporting stronger-than-expected quarterly results. Revenue reached €9.33 billion in the second quarter, beating forecasts, while profit also came in ahead of expectations.

ASML is a key supplier to the global chip industry because its machines are used to make some of the world’s most advanced semiconductors. That makes its results an important signal for AI infrastructure demand.

For markets, this suggests:

• Chipmakers are still investing heavily in capacity
• Demand for advanced AI hardware remains strong
• Semiconductor equipment companies may continue to attract investor attention
• AI-related stocks could remain supported if earnings keep delivering

Softer Inflation Lifts US Futures

US stock futures edged higher after June inflation came in softer than expected, easing concerns that the Federal Reserve may need to raise interest rates again.

S&P 500 futures rose 0.2%, while Nasdaq 100 futures climbed 0.6%. Dow futures were slightly lower, suggesting the market’s optimism was being led mainly by technology stocks.

Lower inflation can be positive for equities because it reduces pressure on central banks to keep borrowing costs high. This is especially important for growth companies, where valuations are often more sensitive to interest-rate expectations.

If inflation continues to cool, markets may begin pricing in a more supportive environment for:

• Technology shares
• Growth stocks
• Consumer companies
• Bonds and rate-sensitive assets

However, one soft inflation reading does not remove all risk. Investors will still be watching wages, energy prices and future Federal Reserve comments.

IBM Shows AI Is Creating Winners and Losers

IBM’s sharp share price fall has highlighted a growing divide within the technology sector.

The company warned that customers were redirecting spending towards artificial intelligence infrastructure, including data centres, chips and networking equipment. This appeared to come at the expense of IBM’s higher-margin software business.

The message for investors is important. AI is not lifting every technology company equally. Some firms are benefiting directly from infrastructure spending, while others may face pressure as customers reallocate budgets.

This could lead investors to become more selective within the technology sector, favouring companies with clear exposure to AI hardware, cloud infrastructure and advanced chips.

Bank Earnings Keep the Market Focused

The latest US earnings season is now a major driver of market sentiment.

Strong results from JPMorgan Chase, Bank of America, Citigroup and Wells Fargo helped support confidence at the start of reporting season. Investors are now watching results from BNY, BlackRock and Morgan Stanley, along with United Airlines.

Bank earnings matter because they provide clues on:

• Lending demand
• Consumer strength
• Credit quality
• Investment activity
• Trading conditions
• Business confidence

If banks continue to report resilient earnings, it may suggest the US economy remains in reasonable shape. But weaker guidance could raise concerns about credit stress and slower growth.

Iran Tensions Remain a Market Risk

Geopolitical risk remains in focus after President Donald Trump said US military strikes against Iran would continue until Tehran agreed to a deal.

Although markets have become more used to Middle East headlines, the risk remains significant. Any disruption to oil supplies, particularly around the Strait of Hormuz, could quickly push energy prices higher.

That could affect markets by:

• Raising inflation expectations
• Pressuring airlines and transport companies
• Supporting oil and defence stocks
• Increasing demand for safer assets

Summary

Markets are currently being pulled between positive and negative forces. Softer inflation and strong AI-related earnings are supporting risk appetite, while bank results are helping investors judge the health of the wider economy. At the same time, geopolitical tensions remain a clear risk.

Conclusion

For investors, the key theme is selectivity. AI infrastructure remains one of the strongest areas of the market, but IBM’s warning shows that not every technology company will benefit equally.

If inflation continues to ease and earnings remain strong, equities could stay supported. However, any renewed oil shock or disappointing company guidance could quickly make investors more cautious. Markets may keep rising, but the gap between winners and losers is likely to become more obvious.

Sources: (Investing.com, Reuters, FT.com)