Weekly Wrap – AI Market Dynamics and Global Economic Highlights


This week we try to assess the heartbeat of the artificial intelligence (AI) value chain based on recent reporting.

  • Micron fails to impress on guidance
  • German savings rate increases
  • A great week for cruise liner investors
  • Copper at two-month lows

The semiconductor company Micron Technology (Micron) has risen from relative obscurity to becoming one of the darlings of the AI-hype cycle. For good reason too. Micron has generally kept its head down while supplying leading-edge memory chips that computer chip makers, including Nvidia, cannot compete without.

Memory technologies are considered to be key enablers of AI and machine learning advancement, and Micron is paid handsomely for its shiny gear. The company reported third-quarter revenue growth of 17% quarter-on-quarter and 82% on a year-on-year basis, driven by share gains in the highly competitive AI-related product market. Both Micron’s gross profit margins of 28% and $702 million net income exceeded the high end of their guidance ranges.

The market, however, was not thrilled by Micron’s revenue outlook and perhaps also by its plans to increase capital expenditure materially in 2025. The share price fell 7.1% on Thursday.

Investors have taken to punishing – even high-quality – S&P500 companies for disappointing on either the earnings or guidance expectations. Recent examples include beverage retail company, Starbucks, which recently reported its first drop in same-store sales since 2020, sending its shares down 12%. Cloud-based software company, Salesforce, in its recent earnings report, failed to impress on its forward guidance despite decent performance – its shares plunged 20% on the day.

Interestingly, Micron’s CEO, Sanjay Mehrotra, highlighted the automotive sector’s growing appetite for memory and storage devices, echoing recent commentary from Nvidia, which expects automotive to lead the demand for its data centre services. A possible clue into what is driving this demand was the announcement on Wednesday that motor manufacturer, Volkswagen (VW), was partnering with Rivian, an electric vehicle (EV) maker, to benefit from the latter’s technologies ranging from chips to autonomous driving systems. Nearly 80 million cars are sold worldwide per year. If carmakers prioritise bringing their car tech into the 21st century, this will make them a lucrative market for semiconductor companies.

Many of the remarks the Micron CEO made during the earnings call emphasised that industry demand for advanced memory chips exceeds supply, which provides comfort around bit pricing. Furthermore, the expanding base of large industries, such as car makers, looking to incorporate leading-edge technologies, supports an optimistic view of the United States (US) semiconductor growth environment.

The market pushback against Micron’s revenue guidance miss may point to its elevated valuation. At $132/share, Micron has doubled in value since the end of October 2023. After such as stellar run, it becomes increasingly harder to satisfy the markets.


The non-seasonally adjusted S&P CoreLogic Case-Shiller 20-City Home Price NSA Index in the US saw a 1.4% increase on a month-on-month basis in April, which is a slight decline compared to the 1.6% increase seen in March, both of which are higher than the average 0.42% increase.  This is a large contributing factor to the 11.3% decline in month-on-month sales of new single-family houses in the US, which has seen its lowest reading in six months.  High prices and increased mortgage rates continue to impact the affordability of houses, leading to plunging sales in the Northeast, South, Midwest and West.

Germany’s GfK Consumer Climate Indicator dropped to -21.8 from -21.0, marking a significant decline further than market expectations of -18.9.  In light of this, there has been an increase in consumer saving, from 5.0 to 8.2, as the tendency to buy remains low. These changes highlight the current consumer slump, while high inflation rates further increase uncertainty among consumers.

The United Kingdom’s (UK’s) S&P Global UK Composite PMI (Purchasing Managers’ Index) fell from 53.0 to 51.7, a significant drop from market expectations of 53.1 and marking the weakest growth since November 2023. The S&P Global UK Services PMI also fell in conjunction with the composite PMI, falling to 51.2, below market expectations of 53. This slowdown in the services sector, as well as declining foreign demand for manufactured goods, is a large contributor to the decline in the composite PMI.  The new business sector showed the lowest level of growth in seven months, while private sector employment continued to rise, albeit at a slower pace than normal. Input prices rose after a 40-month low, while the uncertainty surrounding the upcoming general election has led to a decrease in business confidence and delayed spending decisions.


The MSCI World Index gained 0.35% over the week. Rivian shone as news of its strategic partnership with VW drove the share price up 40%. On the S&P 500 Index, transportation company, FedEx, led the charge, beating out big tech names to gain 16.5% during the week. Three cruise liner companies made it into the top 10 gainers after Carnival Corp raised its annual profit guidance citing record booking volumes for 2025 sailings. The S&P 500 Index was held back by multinational holdings company, Walgreens Boots Alliance, which fell 23.7% as management announced significant retail-store closers to cope with waning demand.  

The local JSE Top40 Index lost 0.80% in value since last week Friday, following a stellar previous week when local equities shone. Banking group, ABSA, was this week’s biggest loser after it released a disappointing trading update on Thursday, which showed a bleak return-on-equity picture for the first half of the year, albeit off a high base in the first half of 2023. The share is down 11% for the week. Gold and base metal miners made up most of the list of top gainers as trend reversal saw local stock lose over rand hedges.


Gold prices fell on Wednesday to a three-month low as the dollar rose, with gold spot prices falling 0.9% to trade at $2,309.60/ounce. The US Federal Reserve (Fed) continues to argue in favour of only one interest rate cut this year, which will keep US Treasury yields high and function as a headwind for gold prices. Gold’s recent failure to break through the 50-day simple moving average is seemingly validating the near-term negative outlook, with a downward trajectory potentially dragging prices to around the $2,200 mark.

West Texas Intermediate crude (WTI) oil prices dropped to $80.30/barrel from a two-month high of $81.65/barrel after a surprising build in US crude stockpiles, which increased by 3.591 million barrels against the expected three-million-barrel decline in the week ending 21 June, leading to weakening demand. In spite of this, WTI crude oil prices rose once more, settling at $80.90/barrel, leaving the US benchmark up 5% for the month, while Brent crude has managed a 4.4% gain in June. Rising tensions in the Middle East have also contributed towards bullish momentum of crude oil prices.

Copper prices fell to a two-month low on Wednesday, under pressure from a stronger dollar, concerns about demand in China, and uncertainty surrounding US interest rates. Inventory levels of copper in China continue to surge while premiums remain low, which signals little sign of demand. Copper signals delivered a reversal on Friday, following a surge to a two-month high of the US Dollar Index.


The US Dollar Index has recently been in demand and is approaching its highest level of the year. It is currently trading at 105.597, which is a 1% increase in June and only slightly lower than the high of 106.52 in April 2024. This increase reflects the fact that the Fed has been keeping interest rates elevated for a longer period than other major central banks. US currency is often viewed as a safe haven asset, so it is benefitting from political uncertainty surrounding the French legislative elections on Sunday, 30 June.

The euro weakened to $1.0687/€, approaching a two-month low following the European Central Bank (ECB) governing council members indicating a potential further two interest-rate cuts this year.  The euro has faced headwinds following Germany’s latest consumer confidence release, as well as political uncertainty surrounding France’s upcoming elections.

The British pound lost 0.5% to the US dollar and touched its lowest level in over a month, falling below $1.2620/£ on Wednesday. It has since edged its way up, rising by 0.2% today to trade at $1.265/£ and set for a weekly price rise of 0.1%. This would be the first weekly increase since the end of May. Political uncertainty around the upcoming UK elections is not having as big an impact as the French elections in the European Union. This is because a potential change in government – that is, a Labour Party majority – may bring more stability to UK politics and open up relationships between the UK and EU.

The South African rand depreciated more than 1% over the week to trade at R18.40/$. An apparent rift between the ANC and the DA regarding cabinet appointments, whereby the ANC withdrew its offer to appoint a DA member as Trade and Industry Minister, has created uncertainty over political developments in South Africa.

Key Indicators:

USD/ZAR: 18.23

EUR/ZAR: 19.50

GBP/ZAR: 23.05


GOLD: $2,327,88

Sources: Bloomberg, Reuters, Trading Economics, Seeking Alpha and CNBC.

Written by Citadel Advisory Partner and Equity Analyst, Thambo Mthwalo and Junior Analyst, Olivia Saulez.

Weekly Wrap content provided by Citadel Pty Ltd.