Don’t ignore the macro. Sure, stocks are doing well, Morgan Stanley’s Lisa Shalett says in a recent note. But don’t underestimate the ability of political risk to derail good earnings: “The Federal Reserve’s unique transitional situation could also foster volatility through 2028, [and] damage to institutions like NATO and OPEC could catalyze new destabilizers. Investors can be forgiven for ebullience around tech earnings and an exciting future, but dismissing macro factors with potentially long-lasting implications strikes us as brash.”
“Most investors appear confident that the GenAI-capex story can compound almost regardless of the macro backdrop, while seemingly dismissing variables experiencing clear trend breakouts (oil, inflation, rates, Fed policy, the U.S. dollar) as transitory noise. We aren’t as sure—not because the AI story is questionable, but because the narrative assumes that what is being priced as secular is truly durable, and what is being dismissed as transitory will, in fact, fade quickly. Both assumptions can fail simultaneously. Among those variables labeled ‘temporary,’ we see potential for headwinds to last longer than discounted, with oil supply disruption a case in point,” she said in her most recent note.
ONE BIG THING
Supermicro’s earnings call today will take place amid a probe that could be ‘fatal’ for the company
Supermicro will report fiscal Q3 earnings today and investors will get a progress report on CEO Charles Liang’s promise that the server manufacturing company could hit $40 billion in revenue this fiscal year, Fortune’s Amanda Gerut reports. But the real drama will be behind the scenes: Six weeks ago, prosecutors charged Supermicro co-founder Yih-Shyan “Wally” Liaw and two others with allegedly conspiring to route $2.5 billion in servers studded with Nvidia chips through a front company in Southeast Asia. Prosecutors allege that Liaw masterminded a scheme that allegedly involved filling a warehouse full of thousands of fake servers with shipping labels that could be peeled off to fool auditors when the real buyers were in China.
David Rybicki, co-leader of law firm K&L Gates, said the company’s internal investigation will be closely examined by the DOJ. The worst outcome for Supermicro, said Rybicki, would be an investigation that the DOJ doesn’t trust. “When you have these kinds of high profile catastrophic compliance failures, I think it’s fair to say they can be fatal for a company,” said Rybicki.
IRAN
Back to war: Fresh missile strikes leave Hormuz more closed than ever
Iran fired on U.S. Navy vessels in the Strait of Hormuz yesterday after American forces accompanied two ships out of the Strait. The U.S. shot down Iranian drones and missiles while also destroying seven Iranian fast boats. Iran responded by bombing an oil terminal in the UAE. Analysts are describing the ceasefire as “fragile” this morning.
About 2,000 ships remain stuck in the Strait. Many of them have moved further away from the narrow gap controlled by Iran—a sign that Tehran now controls more marine territory than it did before, Bloomberg reports.
This map from MarineTraffic.com (below) shows the giant traffic jam in the Strait today. The large dot in the middle is the Rich Starry, the Chinese-owned tanker that Fortune has been tracking. It has not moved since mid-April:
President Trump declined to say that Iran had broken the ceasefire. Notably, he did not post about the war on Truth Social last night. Previously, he had said Iran would be “blown off the face of the earth” if it attacked U.S. ships. Officials told the WSJ he would prefer a negotiated settlement rather than be forced back into a fresh round of strikes on Iran.
Coming up: Defense Secretary Pete Hegseth and Gen. Dan Caine will hold a press conference today on what the Pentagon will do next.
Iran’s drone strike on Fujairah is significant because it is one of the UAE’s most important fueling hubs, according to Peter Sidorov and his colleagues at Deutsche Bank: “The UAE came under missile attacks for the first time since the ceasefire began on April 8, with a fire also breaking out at its oil terminal in Fujairah following a drone attack. The latter has been of increased importance to oil markets as the UAE has been transporting close to 2mmb/day of oil via pipeline to the Fujairah port while Hormuz shipping has been disrupted,”
MIDTERMS
Prediction markets now see a Democratic sweep in November
The rising price of gasoline is one of the main factors hurting the Republicans in polling before the midterm elections in November, according to Sara Godfrey of Oxford Economics: “The House of Representatives has long been the Democrats’ to lose, but until recently, the Senate was a long shot for them. Prediction markets now see the Senate control as a tossup.”
MORE FROM FORTUNE
I watched my father run his business through the Lebanese Civil War. Here’s what it taught me about leading through disruption. – Alain Bejjani
Starbucks CEO gets roasted for $9 ‘premium experience’ remarks, but Wall Street toasts his tariff-era turnaround strategy – Catherina Gioino
China stopped issuing new robotaxi licenses over a glitch. America can’t stop them from rolling into active shooter situations – Catherina Gioino
Trump’s former AI czar says the quiet part out loud on the economy: ‘Stopping progress in AI would be equivalent to halting the U.S. economy’ – Tristan Bove
CHART OF THE DAY
Big Tech’s $2 trillion inbox
This chart from Wells Fargo’s Ohsung Kwon shows the “remaining performance obligations” of four big AI hyperscalers, Alphabet, Amazon, Microsoft, and Oracle. RPOs are sales contracts that are booked for the future but not yet recognized as revenue, because they could fall through.
NUMBER OF THE DAY
74%
No wonder stocks are going up. Three-quarters of S&P 500 companies have now reported Q1 earnings (that’s 317 companies) and 74% of them beat expectations on earnings per share, 78% beat sales expectations, and 63% of them beat both. That’s among the best performances since 2021, according to Savita Subramanian of Bank of America.
THE FRONT PAGES TODAY
Deutsche Bank denies training bankers to manipulate markets – FT
BYD’s passenger EV sales drop for an eighth month as competition heats up – CNBC
Trump administration considering safety review for new AI models – Axios
The Secret Team Blowing Up Ford’s Assembly Line to Make a $30,000 Electric Truck – WSJ
Ships Cluster Further From Hormuz Strait as Iran Widens Grip – Bloomberg
ONE MORE THING
Robots are controlling job interviews now, but they’re lousy at it
Around 63% of U.S. job-seekers have been interviewed by AI, according to a recent report from Greenhouse—a 13% increase from just six months ago. Sharawn Tipton, chief people officer of Greenhouse, tells Fortune’s Emma Burleigh that HR departments are deploying AI interviewers to “filter the flood” of applications.
But it’s a serious professional turn-off: Around 38% of candidates have already withdrawn from a hiring process because it included an AI interview, and another 12% say they would drop out if they were required to do an AI interview. Even when they go through with it, the outcome doesn’t tend to be fruitful—about 51% of candidates who completed an AI interview were either ghosted or are waiting to hear back.
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