Weekly US Stocks: The Roadmap for Interest Rate Stabilization Indicated by PCE Data and a Selection Approach for High-Tech and AI Stocks with Real Demand

Madoka's Weekly Market Diagnosis

Good morning, this is Madoka, editor of the US Stock Journal.

This week's stock market was one wrapped in an atmosphere of Cautious Optimism, as it moved past the previous sense of overheating to reaffirm the direction it should take. As the Fed's monetary policy shifts to the next phase, the market is finishing the stage of being swayed by mere macro interest rate trends. What is now required of investors is an eye to calmly assess each company's fundamentals, especially their ability to implement technology and the speed of their monetization. Let's organize the guidelines for next week together while reading between the lines of the market.

[Deep Dive] The 'Epicenter' that Moved the Market Most This Week

Topic: Deceleration of the US May Personal Consumption Expenditures (PCE) Price Index and Stabilization of Interest Rate Outlook

• Why did the market react?

  • [Fact/Data]

The May PCE deflator released by the US Bureau of Economic Analysis (BEA) rose 2.6% year-on-year, slowing from 2.7% the previous month. Additionally, the core PCE deflator, which the Fed prioritizes, also rose 2.6% year-on-year, matching market expectations. This marked the lowest growth in over three years. As a result, the 10-year Treasury yield in the bond market trended downward, supporting the valuation of the stock market as a whole.

• [US Stock Journal's Independent Insight]

This PCE data became the deciding factor confirming a sustained decline in inflation. The market reacted not just because the numbers were low, but because it interpreted that the Fed had gained the Confidence needed to steer toward monetary easing (rate cuts) in the second half of the year. With increased predictability of interest rates, investors are easing their vigilance against macro risks and finding it easier to allocate capital back into the growth stories of individual companies.

• A turning point in the trend? (Or is it temporary?)

  • [Fact/Data]

Following the release of these economic indicators, the probability of a rate cut starting in September was maintained at a level exceeding approximately 60% on the Chicago Mercantile Exchange (CME) FedWatch tool. The three major US indices (S&P 500, Nasdaq, Dow Jones) reversed from the adjustment of major semiconductor stocks early in the week, and buying movements became dominant toward the weekend.

• [US Stock Journal's Independent Insight]

This is not a temporary rebound, but rather a structural 'trend shift' from a Higher for longer interest rate scenario to a gradual normalization of interest rates scenario. While lower interest rates are a tailwind for small-to-mid-cap stocks and high-tech growth stocks, we analyze that from here on, it will not be a market where 'everything goes up,' but rather a trend of Quality Growth where capital concentrates on companies with actual earnings will become more distinct.

Journal Observed Stocks 'Weekly Report Card'

Here is a short review of 10 stocks that were talked about this week.

• Palantir Technologies (PLTR)

  • Verdict: Buy

  • [Fact]: The company is deploying commercial bootcamps for its proprietary agentic AI platform, AIP (Artificial Intelligence Platform), across the United States, and the pace of customer acquisition is accelerating compared to the previous quarter.

  • [US Stock Journal Insight]: Unlike general conversational AI, support for implementing RAG (Retrieval-Augmented Generation) technology, which is highly integrated with a company's core data, has become a powerful competitive advantage. The company has entered a growth phase accompanied by substantial operating cash flow, and any correction phase is considered a long-term buying opportunity.

• IonQ (IONQ)

  • Verdict: Stay

  • [Fact]: The company is focusing on improving barium ion technology for its trapped-ion quantum coherence time as part of its next-generation quantum computer development roadmap.

  • [US Stock Journal Insight]: Quantum Error Correction (QEC) implementation status and its application to practical use cases remain in the verification stage. While technical progress is steady, it will take time to contribute to commercial revenue, so this is a time to monitor the roadmap patiently without rushing.

• Canaan (CAN)

  • Verdict: Caution

  • [Fact]: While the hash rate of Bitcoin remains at historically high levels, the company is proceeding with shipments of its new 'Avalon' Bitcoin mining ASICs; however, rising capital costs for miners are creating fluctuations in demand.

  • [US Stock Journal Insight]: As a manufacturer of Application-Specific Integrated Circuits (ASICs) whose performance is heavily dependent on Bitcoin price trends, the company is directly exposed to the volatility of the cryptocurrency market. Given the instability of market conditions, one should be cautious about expanding positions at this time.

• NVIDIA (NVDA)

  • Verdict: Buy

  • [Fact]: Although it fell temporarily due to profit-taking by some large investors, it has been reported that the supply chain for the shipment of the next-generation 'Blackwell' architecture is operating smoothly.

  • [US Stock Journal Insight]: Liquid cooling infrastructure and hyperscaler investment appetite for high-performance interconnect technology remain undiminished. The short-term correction is a process of normalizing valuations for the 'prime candidate' of AI infrastructure, and it is considered a good opportunity to buy on the dip.

• Microsoft (MSFT)

  • Verdict: Buy

  • [Fact]: Continuous updates to AI integration features for the cloud division, Azure, and an increase in the average revenue per user (ARPU) for enterprise Copilot contracts have been confirmed.

  • [US Stock Journal Insight]: This is the company that is most efficiently converting the social implementation of AI into cash (revenue). It possesses strong pricing power and is a solid stock that should be maintained as the core of a portfolio.

• SoundHound AI (SOUN)

  • Verdict: Stay

  • [Fact]: Although they announced new contracts for voice recognition solutions for automotive and restaurant chains, the ratio of marketing expenses to revenue remains at a high level.

  • [US Stock Journal Insight]: Edge AI voice recognition technology is commendable, but the future focus will be on how they clearly differentiate themselves from the technology of competing mega-tech companies and map out a path to profitability. Let's keep a close eye on their progress.

• Tesla (TSLA)

  • Verdict: Stay

  • [Fact]: With the second-quarter delivery announcement scheduled for the following week, the stock price trended upward from its lows as market expectations were kept at a low level.

  • [US Stock Journal Insight]: While the short-term slowdown in EV sales is being priced in, investor interest is shifting toward a re-evaluation from a hardware manufacturer to a "platform company," focusing on areas like Full Self-Driving (FSD) licensing and the construction of AI server networks.

• Broadcom (AVGO)

  • Verdict: Buy

  • [Fact/Data]: Demand for ASICs for network switches and silicon photonics technology that enables high-speed data transmission is expanding alongside the surge in data center construction.

  • [US Stock Journal's Proprietary Insight]: They possess unique technological capabilities to resolve bottlenecks in 'peripheral network bandwidth' beyond just AI chips. They are the most stable entity to profit from behind the scenes of the AI boom, and are highly commendable.

• Super Micro Computer (SMCI)

  • Verdict: Caution

  • [Fact]: While shipments of racks equipped with liquid cooling solutions for AI servers are surging, concerns have been raised regarding a decline in product margins (gross profit margins) due to the entry of competitors.

  • [US Stock Journal Insight]: Although the sales growth speed is tremendous, as it is a hardware assembly model, challenges remain in maintaining long-term profit margins. It is wise to refrain from aggressive new buying until the margin trends can be accurately evaluated in the next earnings report.

• CrowdStrike (CRWD)

  • Verdict: Buy

  • [Fact]: The AI-driven security platform 'Falcon' is penetrating the small and medium-sized business (SMB) market, and growth in Annual Recurring Revenue (ARR) is being maintained.

  • [US Stock Journal Insight]: As corporate digital transformation progresses, defense against cyber threats becomes essential. It is a leader in a 'must-have' sector where budgets are difficult to cut, and solid returns can be expected.

Next Week's 'Turning Point' and Scenario Planning

Upcoming events next week:Announcement of the US June Employment Report (Non-farm payrolls and unemployment rate)

• 【Fact】

In the previous month's employment report, the number of employed persons exceeded market expectations, demonstrating the strength of the labor market, but the growth in average hourly earnings showed a trend of moderate deceleration. The Fed has indicated a stance of prioritizing the prevention of an 'unexpected deterioration (crack)' in the labor market, in addition to inflation trends, when making interest rate cut decisions.

• 【US Stock Journal's Independent Insight】

The employment report to be released next week will be the final piece to complete the 'good puzzle' of PCE inflation slowing down. Numbers that are too strong will push back expectations for interest rate cuts, while numbers that are too weak will raise concerns about a recession. Whether the result is a 'Goldilocks' outcome for the market will determine future momentum.

• 📈 Bull Scenario: Employment increases by 150,000 to 180,000, unemployment rate remains around 4.0%

  • This is a scenario where the overheating of the labor market subsides moderately while the resilience of the economy is proven. In this case, the path to a September rate cut will be definitively recognized, and it is highly likely that funds will flow into high-tech/growth stocks such as PLTR and IONQ, as well as small and mid-cap stocks, favoring the decline in interest rates.

• 📉 Bear Scenario: Employment drops sharply to under 100,000, or an unexpected surge of over 250,000

  • Numbers that are too weak will trigger recession concerns, suggesting that 'rate cuts must be rushed, but only because the economy is deteriorating.' Conversely, numbers that are too strong will push back the timing of rate cuts to December or later. In this case, due to caution regarding rising interest rates, stocks with high valuations are expected to be sold off temporarily, and funds are expected to retreat into defensive stocks or undervalued large-cap stocks. As a defensive line, let's confirm the maintenance of the S&P 500's recent support line.

Editor's Note (Weekend Coffee Break)

Thank you for your hard work this week as well. Recently, between data analysis sessions, drinking 'cold brew coffee' at a cafe near the office has become my modest weekend routine. Coffee extracted slowly over time has no harshness, and the deep richness inherent in the beans is brought out.

I feel that stock investment is similar to this cold brew. I want to maintain a long-term perspective, like extracting the delicious essence of a company's 'intrinsic value' over time, without being swayed by daily noise (harshness). Market analysis using AI tools is also updated daily, so I would be happy if you could use this journal as a 'filter' for your investments. Have a wonderful weekend.

US Stock Journal Editor-in-Chief Madoka

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【Reference Information/Sources】

• US Bureau of Economic Analysis (BEA): https://www.bea.gov/

• Palantir Technologies Investor Relations: https://ir.palantir.com/

• IonQ Investor Relations: https://investors.ionq.com/

• Canaan Inc. Investor Relations: https://investors.canaan.io/

• US Securities and Exchange Commission (SEC) EDGAR System: https://www.sec.gov/edgar

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