The two things this market has spent all summer worrying about — inflation and whether AI spending pays off — both delivered reassuring answers on the same morning.
US stocks climbed Wednesday, pushing back toward record territory, after July’s consumer price index came in line with expectations and a wave of AI infrastructure companies reported results that comprehensively beat Wall Street’s forecasts. CoreWeave surged 19%, Nebius rocketed 34%, and Super Micro Computer jumped 19% — three companies whose entire business is building and operating the AI buildout, all confirming that demand at the operator level remains ferocious.
The inflation data did the rest. Headline CPI rose just 0.1% month-over-month and 3.4% year-over-year, while core CPI — stripping out food and energy — increased 0.2% monthly and 2.5% annually, the slowest pace since March 2021. Odds of a September rate hike, which had sat near 50% before the release, fell to roughly 40%.
Index Performance
Rates, Dollar, Commodities
July CPI: The Chipflation Test
The report was notable as much for what it revealed about the AI economy as for the headline number.
Shelter costs, the largest single component of the index, continued to decelerate — the primary driver of the cooling. But the more interesting story sat in the details, where “chipflation” finally showed up in the official data. Information technology hardware prices rose 1.4%, reflecting the price increases Apple announced last month on MacBooks and iPads in response to the memory shortage. The saving grace is arithmetic: IT equipment carries a weight of only about 0.7% in the CPI basket, so even a sharp increase barely moves the aggregate. Airfares also jumped 2.2%, a direct pass-through of higher jet fuel costs from the summer’s oil shock.
The takeaway is that the AI-driven component-cost surge is real and measurable — it just isn’t yet large enough in the consumer basket to derail the disinflation trend. Whether that remains true as price hikes propagate through more categories is one of the more interesting questions for the autumn.
Long-dated Treasuries, notably, did not join the celebration. Yields at the long end stayed supported by persistent Middle East tension and lingering inflation concern, with the 10-year holding around 4.68% and the 30-year near 5.23% — a reminder that the bond market’s structural worries are separate from any single month’s data.
The AI Infrastructure Sweep
The earnings were the day’s other engine, and they were emphatic.
CoreWeave surged 19% after second-quarter revenue of $2.58 billion — up 112% year-over-year — beat estimates, with an adjusted operating income margin of 5% against the 2.7% StreetAccount consensus. Nebius rocketed 34% on revenue of $582.3 million, up 454% year-over-year, and disclosed remaining performance obligations of $37.49 billion alongside first-half capital expenditure of $8.13 billion. Super Micro Computer jumped 19% on guidance that shattered expectations: adjusted earnings of $1.01–$1.10 per share versus the 76-cent LSEG consensus, and revenue of $14.5–15.5 billion against $11.68 billion anticipated.
Data center-related names rallied in sympathy across the board. The significance is that these three companies sit at the operating layer of the AI economy — they don’t sell chips or models, they build and run the capacity. When all three beat simultaneously and guide higher, it becomes considerably harder to argue that hyperscaler capex is being wasted. Nebius’s $37.5 billion backlog in particular represents contracted future revenue, not projection.
Banks Extend a Remarkable Run
Financials had a strong session, with Citigroup up 1.33%, Bank of America gaining 1.27%, and JPMorgan rising 0.87% — the latter extending a ten-week winning streak. Three forces are working in the sector’s favor simultaneously.
The first is the shape of the yield curve. Short-term rate expectations fell on the soft CPI while long-term yields held firm on geopolitical and inflation concerns — and a steeper curve is the single most direct input to bank profitability, since lenders borrow short and lend long. Wednesday delivered exactly that combination.
The second is the soft-landing narrative. Cooling inflation without a labor-market collapse implies healthy loan growth and contained credit losses, the ideal environment for commercial and consumer lending.
The third, and most underappreciated, is that banks have become the primary intermediaries of the AI capital cycle. Every development that has unsettled equity investors this month — Nvidia’s $500 billion financing consortium, Alphabet’s $25 billion bond plan, Intel’s upsized $20 billion equity raise, Amazon’s $25 billion issuance — represents underwriting fees, lending spreads, and advisory revenue for the banks arranging them. That shift is now explicit in strategy. The Wall Street Journal reported that Bank of America plans to allocate $250 billion to support investment in data centers, energy, and critical minerals, following Morgan Stanley’s announcement Monday of a $1.5 trillion infrastructure initiative focused on innovation platforms and strategic industrial capacity.
The AI buildout has migrated from a cash-flow story to a credit story, as this column has noted repeatedly. Wednesday was a reminder that when an industry starts financing itself through capital markets, the financiers get paid.
SpaceX Soars on Grok 4.6
SpaceX jumped 9.65%, its best session since the post-IPO turbulence began, on a combination of product and ownership news.
The company unveiled Grok 4.6, its latest frontier model, which Elon Musk claimed was “objectively #1 when considering intelligence, speed & cost.” Independent benchmarker Artificial Analysis scored it 61 on its Intelligence Index — roughly in line with GPT-5.6 Sol, and somewhat below Claude Opus 5 and Fable 5 — but the pricing is the story: approximately $2 per million input tokens and $6 per million output, versus Claude Opus 5 at $5/$25 and GPT-5.6 Sol at $5/$30.
That pricing carries a second-order implication the market grasped quickly. Cheaper frontier models expand inference volume rather than shrinking it, and more inference pulls more HBM, DRAM, and NAND through the stack — which is part of why memory names participated in the day’s strength.
Separately, Norway’s sovereign wealth fund — the world’s largest at $2.3 trillion — disclosed a holding of 7.3 million SpaceX shares, roughly 0.05% of the company and about $1.2 billion. Institutional validation of that caliber, arriving days after the lockup expiration that many expected would break the stock, helped cement the recovery.
Around the Market
Intel rose 3.32%, shaking off the dilution shock from its upsized $20 billion offering, after it emerged that CEO Lip-Bu Tan personally participated — buying $12 million worth at the $95 offering price. Insider buying into one’s own dilutive raise is about as direct a confidence signal as a chief executive can send.
Alphabet and Broadcom both weakened on a shared thesis: the two are the primary players behind Google’s TPU, with Alphabet seeking to expand external TPU sales and Broadcom manufacturing the chips. The emerging skepticism is that displacing Nvidia’s entrenched share will prove considerably harder than the bull case assumes — a notable counterpoint to the custom-silicon narrative that has been building since OpenAI’s Jalapeño unveil.
Software saw broad profit-taking after its recent run, with Palantir, ServiceNow, and Salesforce mostly down around 2%, and the iShares Expanded Tech-Software ETF (IGV) slipping 0.81%.
OpenAI revenue grew 20% month-over-month, with enterprise revenue up 32%, according to Bloomberg reports — a demand data point that reinforces the infrastructure earnings.
After the Bell
Cisco fell 3.7% despite beating estimates and issuing quarterly revenue guidance above expectations — the by-now-familiar pattern of good results meeting an unforgiving bar.
Cerebras Systems plunged 15.7% after disclosing an unexpected decline in its hardware segment, a jarring outlier in a day otherwise defined by AI infrastructure strength.
Bottom Line
Wednesday assembled about as favorable a combination as this market could ask for. Core inflation at its slowest since March 2021 pushed September hike odds down toward 40%. CoreWeave, Nebius, and Super Micro all confirmed that AI demand at the operating layer is accelerating, not moderating. Banks rallied on a steeper curve and their expanding role as the AI cycle’s financiers. And SpaceX’s Grok 4.6 demonstrated that frontier model costs are collapsing in a way that expands, rather than threatens, hardware demand.
The one discordant note remains the long end of the curve. Thirty-year yields near 5.23% haven’t budged despite the friendly inflation print, held up by Middle East risk and the coming wave of corporate duration. That is the variable to watch: equities can absorb almost anything while earnings deliver like this, but a market this dependent on long-duration growth stories is not indifferent to long-duration borrowing costs.
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