S&P 500: -0.25% DOW: 1.5% NASDAQ: 1.40% 10-YR Yield: 4.32%
What Happened?
It looked like a quiet week from a distance. The S&P 500 closed Friday at 7,108.40, the Nasdaq at 24,438.50, and the Dow above 49,300, all within a whisper of where they started, and all still parked at or near record territory. The truce headlines from the U.S.-Iran ceasefire extension on Tuesday gave the rally one more leg up; the soft-landing narrative held; oil drifted higher but didn’t break out. On the surface, a perfectly fine week.
Underneath that surface, the rotation got loud. Intel blew the doors off Q1 and added another 20% in after-hours Thursday on guidance that suggested the entire CPU thesis is being rewritten. Texas Instruments had its best day since the dot-com era. ServiceNow had its worst day on record. IBM lost 8% on a quarter that beat estimates. The semiconductor index ripped for an 18th straight session while the software ETF (IGV) finished the week down. In a market where the headline indices barely moved, the leadership board reshuffled completely.
The Iran story is starting to drift into the background even as it remains live. Trump extended the two-week ceasefire on Tuesday, citing Tehran’s “seriously fractured” government, and the market mostly took it in stride. Oil settled in the low $90s for most of the week before a Thursday spike past $106 on flare-ups around the Strait of Hormuz, but even that didn’t dent the broader tape much. The bigger story now is the one earnings season is telling: AI infrastructure spending is real, durable, and broader than anybody priced in three months ago. The CPU side, the analog side, the foundry side, all of them are getting paid this quarter. The companies that bet they could sell software into an AI-uncertain world, like ServiceNow and Salesforce, are being forced to defend their numbers a quarter sooner than they’d hoped.
For diversified portfolios, this week was a reminder that breadth is a feature, not a bug. Owning the index instead of trying to pick the next leadership group meant capturing the Intel and TXN rallies without having to take the ServiceNow and IBM hit on the chin. Three weeks ago, the question was whether to chase. This week, the question is whether the rotation underneath these record closes is signaling something more durable about where capital wants to live for the rest of 2026, and the early answer looks like “chips, infrastructure, anything that touches the build-out, and maybe not the application layer just yet.”
Intel Just Cleared Its Dot-Com Highs and the AI Trade Got Three Inches Wider
- Q1 revenue: $13.6B vs. $12.4B est. (+7% YoY) — beat by ~$1.2B
- After-hours move: Up ~20% Thursday, with shares opening Friday near all-time highs
- Tesla 14A deal: First major external customer commitment for Intel’s most advanced upcoming process node, anchored at Terafab in Austin
- YTD performance: Stock +80% before earnings; +30% in pre-market Friday following the print
The key takeaway – For three years, the AI-and-chips story was a one-name story: Nvidia, Nvidia, Nvidia. This week, Intel reported a quarter so far above the bar that it forced the market to acknowledge what the CPU side of AI infrastructure has been quietly doing — and the stock cleared a price ceiling that had held since the dot-com peak.
JThe numbers were not subtle. Q1 revenue of $13.6 billion blew past the $12.4 billion consensus by nearly $1.2 billion. Non-GAAP EPS of $0.29 absolutely shattered the $0.01 analysts had penciled in, a beat so large that one outlet calculated it as a 2,800% surprise. The Data Center and AI segment grew 22% year-over-year to $5.05 billion, against expectations closer to $4.4 billion. And then Intel did the thing that really made traders pay attention: guided Q2 revenue to a range of $13.8 to $14.8 billion against a consensus of roughly $13.1 billion, with EPS guidance of $0.20 against the $0.10 the Street was modeling.
The catalyst sitting underneath the print was the Tesla announcement that came in the final 24 hours before earnings. CEO Elon Musk confirmed during Tesla’s own Q1 call on Wednesday that Tesla and SpaceX will use Intel’s 14A process node for the Terafab project being built in Austin, Texas. That’s the first major committed external customer for Intel’s most advanced upcoming process, and the missing piece in the foundry story that bears have been pointing at for two years. Add it to the existing Amazon, Cisco, and Google relationships, and the foundry business stops being a money pit and starts looking like a viable second leg.
The broader read for portfolios is the more interesting part. The market had spent the past three years pricing the AI build-out as a winner-take-all GPU story. Intel’s quarter, combined with Texas Instruments’ 19% rip on the same theme one day earlier, suggests the build-out is broadening faster than the consensus thought possible. Server CPUs, advanced packaging, analog power management, and chip fabrication capacity are all suddenly contributing meaningful revenue to companies the market had largely written off. For diversified equity exposure, that broadening is healthy: it means the next leg of the AI cycle does not have to come from one $5 trillion stock doing all the work.
ServiceNow Met the Quarter, Blamed the War, and Had Its Worst Day on Record
- Middle East headwind: ~75 bps of subscription growth attributed to delayed on-prem deal closings
- Single-day drop: –18%, the worst single-session drop in company history
- Software contagion: Salesforce –9%, Workday –9%, Adobe –7%, HubSpot –8%, Oracle/Intuit –6%; IGV –6% on the day
- YTD damage: ServiceNow stock now ~30% YTD; Workday ~–45% YTD; IGV ~–19% YTD
The key takeaway – ServiceNow narrowly cleared Q1 estimates and raised full-year guidance. The stock fell 18%, its biggest single-day drop since at least 2020, and dragged the entire enterprise software complex down with it. When a company explains a guidance trim by pointing at a war, the market tends to wonder whether the war is the only problem.
On paper, Wednesday afternoon’s release looked manageable. Subscription revenue grew 22% year-over-year to $3.67 billion. Adjusted EPS of $0.97 came in line. Full-year subscription revenue guidance was actually raised to a range of $15.74 to $15.78 billion (from $15.53 to $15.57 billion). For most companies, that’s a release that earns a green candle and a quiet afterhours.
But ServiceNow had two specific problems hidden in the commentary. First, CFO Gina Mastantuono attributed roughly 75 basis points of headwind in subscription growth to delayed closings of large on-premise deals in the Middle East, directly tied to the Iran conflict. Second, she explicitly cited “incremental conservatism” in the full-year guide because of geopolitical risk. The math was actually fine; the explanation was what scared people. A company that has spent two years selling itself as the indispensable “AI control tower” suddenly sounded like it was qualifying its forecast around an external variable it could not control.
The reaction was brutal and it was contagious. ServiceNow fell 18 percent, its worst day on record, and pulled the rest of the enterprise software complex down with it. Salesforce fell 9 percent, Workday slid 9 percent, Adobe lost 7 percent, HubSpot dropped 8 percent, Oracle and Intuit each fell roughly 6 percent. The iShares Expanded Tech-Software ETF (IGV) lost about 6 percent on Thursday alone and is now down roughly 19 percent year-to-date. Goldman, Jefferies, Piper Sandler, BTIG, and Needham all cut price targets, though most kept Buy ratings, citing AI traction and the upcoming May 4 analyst day as the next likely catalyst.
There’s a longer story here that this quarter just made impossible to ignore. The market has been getting more skeptical for months about whether AI tools will disrupt the seat-based subscription software model. ServiceNow’s quarter did not cause that fear, but it gave it a specific number to anchor to. For diversified portfolios, this is the textbook case for not concentrating in any single sub-sector, the same week that semis ripped to new highs, software gave back roughly two months of gains. Owning both meant the moves largely cancelled out. Owning only one meant you had a very different week.
From Around the Watercooler
Anthropic Surged to a $1 Trillion Valuation in an ‘Absolutely Wild’ Three-Month Run
Texas Instruments’ stock jumps 19% for best day since 2000 as AI demand soars
Tesla beats Q1, then unveils a $25B capex plan that spooks investors
S&P 500, Nasdaq close at records, boosted by Intel, as investors hope for a restart to U.S.-Iran talks
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