Iran strikes rock markets, but Chinese AI is stealing the show.

Transcript

Tom Iran strikes, oil spikes, and the dollar rips to a fifty-two-week high — but forget all that, because Chinese AI is quietly reordering the world, and Alibaba just surged fourteen-point-seven percent in a week. I'm Tom, and this is Investment Flash.

Marie It's Monday, July thirteenth, the New York Edition. I'm Marie, with Gerald and Tom. And Tom, I see you're already off to the races on Chinese AI.

Gerald He's been like this since the London open, mate. One Goldman note and he's already renaming the podcast 'Alibaba Flash'.

Tom Gerald, Gerald — three separate sources today, buddy. Goldman, FT, Nikkei. DoorDash, Siemens, Airbnb — they're all adopting Chinese models. This isn't a trade, it's a structural demand shift.

Marie Right, and that's the thing — the FT piece is our most original take today. Western companies undermining US tech dominance by turning to Chinese AI to cut costs. That's a durable, non-cyclical driver.

Gerald To be fair, Alibaba is up fourteen-point-seven percent in the last week. That's not exactly a secret. The trade is crowded, Tom.

Tom Crowded? Alibaba is still down twenty-eight percent year-to-date! There's plenty of room. And Baidu, flat on the week, down twenty-two percent year-to-date. The AI narrative hasn't been fully priced for the rest of the sector either.

Marie And the China internet ETF — KWEB — barely moved in Friday's session, still down twenty-six percent year-to-date. So even with the weekly surge, it's nowhere near overbought.

Gerald Right, because buying Chinese ADRs has never blown up in anyone's face.

Tom Oh come on, Gerald. Look at Nikkei — Indian companies are now adopting DeepSeek, Alibaba, Moonshot. This is global. The China AI story has legs.

Marie And it's not just the stock picks. The convergence here is powerful. Three publishers, two different angles — Goldman with the stock picks, FT with corporate adoption, Nikkei with India. That's a real signal.

Gerald Look, I'm not saying there isn't a story. But last week's episode, you were all over BYD, Tom. How's that working out?

Tom Ha! Fair enough. But BYD's up three percent in Friday's session, thank you very much. And Genesis Minerals from Marie? Nice call.

Marie It was a structural play. Speaking of which, battery and minerals — FT has Australians 'going gangbusters' on Chinese batteries for renewable storage. And Bloomberg says Beijing is backing a new mining investment firm for strategic minerals. Lithium and rare earths both pulled back significantly last week.

Tom Right — the lithium and battery ETF LIT down five percent, rare earths ETF REMX down six and a half. That's a gift. The demand is structural: Australian batteries, Chinese government buying. This is a no-brainer for a pullback entry.

Gerald A no-brainer until China bans rare earth exports and spikes the price — which, by the way, nobody seems to be discussing. That could move REMX twenty percent overnight. Worth a watch.

Marie I'm going to push back here, Gerald. The point is the asymmetry. LIT and REMX are deeply oversold on technicals, but the fundamental demand from both Australia and China's own strategic push is accelerating. That's a setup.

Tom Exactly. One hundred percent.

Gerald Alright, alright — you two have me cornered on green metals. But let's talk about what's actually moving markets right now: Iran.

Marie Friday's session was all risk-off. Oil surged, the dollar blew to a fifty-two-week high, and long bonds got hammered. Gold and silver sold off hard because the strikes fueled rate-hike expectations.

Gerald And this is the key: the dollar is strong because it's a safe haven, but bonds are weak because of inflation fears. It's the twin inflation trade. The dollar ETF UUP at a fifty-two-week high, the long-duration Treasury ETF TLT just two percent above its fifty-two-week low. Extreme positions.

Tom Okay, Gerald, but aren't those trades super crowded? TLT at the low, UUP at the high — if there's any de-escalation or a dovish Fed hint, that pair violent unwinds.

Gerald That's the risk, yes. But the macro backdrop right now supports it. Oil is the transmission mechanism. Higher oil means higher inflation expectations, which means rates stay higher, which kills bonds and gold and boosts the dollar. It's a coherent regime.

Marie Right — and that's why precious metals got wrecked. The gold ETF GLD down one-point-three percent last week, silver ETF SLV down three-point-eight. When real yields rise, gold doesn't act as a safe haven. It just sells off. The old playbook is broken.

Tom So we're selling gold and silver? That feels icky, Marie. But the logic is sound.

Marie It's not about feeling icky. The macro forces are clear. GLD is twenty-six percent below its fifty-two-week high, so there's room. SLV is a disaster, down eighteen percent year-to-date. The bear case isn't crowded.

Gerald Finally, Marie agrees with me on something. Mark the calendar.

Marie Don't get used to it.

Tom Alright, but let's talk about the tech rout. FT says investors are cutting bets on TSMC, SK Hynix, Samsung — those three alone were twenty-nine percent of the EM index. TSMC down three-point-nine percent last week. The rotation is real.

Gerald And the semiconductor ETF SMH is still only nine percent below its fifty-two-week high. That's not a rout, Tom. That's a gentle breeze.

Tom Momentum is turning, Gerald. When the most crowded trade starts to unwind, it can go further. South Korea, EWY, down three-point-three percent last week — it's a direct proxy. Sell TSMC, sell SMH, sell EWY.

Marie Wait — wait a second. Are we sure this isn't just geopolitics? A temporary Iran scare sparks profit-taking in overowned names. If tensions ease, these stocks snap back hard. The long-term AI chip demand thesis hasn't changed.

Tom Marie, you're always the contrarian. But this time, the positioning is so extreme that a mean reversion is probably healthy. And we've seen this before — chip rallies don't go vertical forever.

Gerald He's not wrong. When a sector becomes twenty-nine percent of the EM index, it's begging for a pullback. It's basic P-E gravity.

Marie Alright, but I'll be watching for a reversal headline.

Tom Fair. Now, food commodities — Bloomberg's John Authers flags a double supply shock: El Niño and the Iran war squeezing food. The ag ETF DBA up only zero-point-eight percent last week. The market hasn't priced this.

Gerald Right, so this is actually an early trade, Tom. Wheat, WEAT, was up two-point-nine percent in Friday's session and eighteen percent year-to-date, but the real spike could come if the conflict escalates. Agricultural commodities are asymmetric.

Marie And the consumer angle: US consumers are already on edge about high food prices. Any further spike hits sentiment directly. That feeds back into the macro picture.

Tom So we're long wheat and long the ag ETF. Simple. I like it.

Gerald Of course you do. It's a momentum trade, buddy.

Marie Quickly, two other stories: Citigroup — Jane Fraser's restructuring, asset sales, job cuts, closer Trump ties. The stock is up eighteen percent year-to-date. Much of the turnaround is priced in, so we're holding, not buying more.

Gerald To be fair, restructuring stories rarely deliver quick upside. The market's already given her credit. The financials ETF XLF isn't moving on this — it's a firm-specific story.

Tom And the HSBC board-lot reform in Hong Kong? SCMP says it'll boost turnover and retail participation. Low-risk catalyst. Buy HSBC, buy HKEX.

Marie It's incremental, but it's exactly the kind of structural catalyst that works over time. No drama, just a steady grind.

Gerald Alright, should we get to the synthesis? Because I know Tom has a paired trade brewing.

Tom I do, I do. Our view today: fade the consensus. Long Chinese tech proxies, like the China internet ETF KWEB, versus short US duration, like the long-duration Treasury ETF TLT. That pairs a structural tailwind against a crowded macro short.

Gerald Hang on — that's actually clever. You're getting the Chinese AI adoption story, which most macro models miss, while shorting the most consensus trade in the bond market. If anything changes, one side cushions the other.

Marie Exactly. And the China side has the convergence — Goldman, FT, Nikkei — while the bond side is just riding the extreme positioning. It's not a bet on Iran or the Fed; it's a bet on the divergence between old risk-off and new structural growth.

Tom And if the tech name sell-off continues, KWEB is still insulated because it's not a chip proxy — it's internet and AI platforms. It's a cleaner expression.

Gerald One risk: if the Fed suddenly turns dovish, TLT rips higher and crushes the short. So size it, but the logic holds.

Marie As always, none of this is investment advice. Just our take on the signals. And Tom, if you're just finding us, hit follow on Spotify — or check investmentflash.com for the full digest with charts and sources.

Tom Marie with the plug. Smooth.

Gerald She's been practicing.

Tom We're back tomorrow with the London Edition at seven-thirty a.m. London time. See you then.