Week in Review: AI Infrastructure Carries S&P to Six Straight as the Iran

Week in Review

The week of May 4–10 opened under the shadow of escalating Iran tensions and closed with the most forceful AI chip rotation of 2026. On Thursday, President Trump elevated his rhetoric to direct bombing threats against Iran — a statement that sent gold surging 3.03% and oil higher on Hormuz disruption fears, while simultaneously triggering a broad equity rally (QQQ +2.08%, SPY +1.39%) as investors repriced AI infrastructure names as the safest compounding story in a geopolitically charged tape. NVIDIA led with a 5.77% single-session gain as ADB's $70 billion Southeast Asian digital infrastructure commitment underscored the multi-year scale of global compute demand.

By mid-week the Iran situation had escalated from threat to confirmed combat: a naval exchange of fire in the Strait of Hormuz validated fears that the conflict had passed the point of bluster. Yet equity markets absorbed the news with relative composure — the VIX remained in the 17-range — because the AI earnings cycle was simultaneously delivering its own counter-narrative. Datadog surged 31% on a blockbuster software earnings report, confirming that AI software monetization is producing real revenue, while CoreWeave fell 10% on weak guidance, surfacing the distinction between proven software monetization and unproven infrastructure margin structures. Separately, Michael Burry publicly drew a parallel between today's narrow-breadth rally and the late-1999 market — a warning that joined a growing body of evidence about concentration risk in the AI complex.

Friday delivered a chip-cycle exclamation point. Intel's Apple manufacturing deal and Micron's extraordinary 38% weekly gain prompted Wall Street to declare a "changing of the guard" in semiconductor leadership, even as Nvidia held firm as the structural standard. The Philadelphia Semiconductor Index gained more than 10% on the week and is now up 65% year-to-date — a move that lifted the Nasdaq Composite 4.5% for the week and drove the S&P 500 to its sixth consecutive weekly gain, closing near 7,399 with year-to-date returns of +8.1%. Q1 blended earnings growth reached 27.7%, the highest reading since Q4 2021, providing fundamental underpinning for the rally's durability. After Friday's close, NVIDIA disclosed that it had made more than $40 billion in AI equity investments in 2026 alone — a Saturday development that reframes the company from hardware vendor to ecosystem capital orchestrator, a structural moat development beyond any single hardware cycle.

On the geopolitical front, the week ended without resolution. A two-week ceasefire framework technically held — no formal collapse was announced — but the Strait of Hormuz remained closed, three U.S. warships were targeted (none struck) on May 7, and the Trump administration confirmed it was awaiting Iran's formal response to a 14-point memorandum of understanding transmitted through Pakistani mediators. Gold reflected this unresolved binary: after retreating modestly on Thursday's peace-deal optimism, it climbed back above $4,720 per ounce on Friday as the ceasefire deadline passed without public resolution. Oil tumbled on hopes for Hormuz reopening but remains elevated on a structural basis as oil executives warned of long-term energy market repricing.

Next Week Outlook

Tuesday's April CPI report is the week's defining macro risk event. Consensus expects headline CPI at +0.7% month-over-month and +3.7% year-over-year — a notable acceleration from March's 3.3% print — driven largely by energy prices elevated by the Hormuz disruption. Core CPI is expected at a much softer +0.1% month-over-month, which would offer the Fed some comfort that second-round effects have not yet embedded. The key question is whether energy pass-through into core services accelerates: a hot surprise on core CPI into an active Middle East conflict is the most credible near-term catalyst for a rate-risk repricing and a growth-multiple compression across the AI complex. Conversely, an in-line or soft print would validate the Fed's on-hold posture and provide the equity rally with another extension runway. The 10-year and 30-year Treasury auctions on Tuesday and Wednesday respectively will reveal whether bond markets are growing more concerned about inflation re-anchoring — demand weakness at either auction would be a secondary signal worth monitoring.

Thursday's Retail Sales data (consensus +1.2% m/m headline, +1.5% core) will test whether U.S. consumers are absorbing elevated energy prices without meaningful demand destruction. The prior month's +1.7% reading was exceptionally strong, and a sequential deceleration is already priced in — but any downside surprise into a week where CPI surprised to the upside would create a stagflationary data combination that equity markets are not currently pricing. Initial Jobless Claims the same day will complement the April jobs report context: the labor market has been the anchor of the soft-landing thesis, and any early signs of deterioration carry outsized narrative weight. The ECB's Lagarde speaks twice — Wednesday and Thursday — and given the parallel inflationary pressure in Europe from energy and supply disruption, her tone on rate policy will set the cross-asset context heading into Friday's close.

The Iran binary remains the dominant non-data risk. If Tehran formally accepts the U.S. peace memorandum in the coming days, gold would rapidly give back its war premium, oil would fall, and the portfolio's geopolitical hedge would unwind — releasing risk appetite for a pure AI-plus-growth posture with the 20% cash reserve available for deployment. If diplomacy stalls or collapses, the Hormuz closure deepens real-economy damage to consumer, manufacturing, and travel sectors while gold extends. Investors should watch for any formal Iranian statement early in the week, as Secretary Rubio had expected a response by Friday's close — the absence of one heading into Monday is itself a signal about negotiating dynamics. The constructive base case — AI capex holds, Iran diplomacy drags without full escalation, Fed stays on hold — remains intact, and the six-week S&P rally has enough earnings-cycle support to hold above its 20-day moving average unless a macro surprise forces a regime reassessment.