The stock markets are entering a potentially volatile phase, as we are facing several days without any significant macroeconomic data. We are in for an information drought until 26 August, when Nvidia is set to report its earnings.
The latest personal consumption expenditures (PCE) inflation data, currently the Federal Reserve’s most important indicator, will also be released that day. Until then, an unusually long absence of major data releases could leave the markets particularly vulnerable to unexpected news.
Oil Defies Hormuz Threats
Even developments in the Strait of Hormuz may not provide a catalyst in the coming week. At first glance, the situation appears to be completely deadlocked – literally.
The US claims that its control over the strait is so complete that the president practically claims it as his own territory. Iran, in turn, maintains that the strait is under its control and that nothing will pass through without its consent.
Analysts have pointed out several times over the summer that the price of oil does not reflect the intensity of the rhetoric from the US and Iran. According to both sides, not even a mouse – let alone a tanker – should be able to slip through the strait. Official statistics indicate a maximum of 10 ships per day.
How, then, can we explain why the price of oil has not exceeded $100 per barrel? And on top of that, why did US commercial oil inventories unexpectedly rise last week?
US Energy Secretary Chris Wright offered a possible explanation during an interview with Bret Baier on Fox News on 13 August.
According to Wright, there is a flurry of activity in the Strait of Hormuz. The number of ships passing through each day is much higher because they are sailing with their tracking systems turned off. According to the energy secretary, approximately 14 million–15 million barrels of oil are currently being shipped through the strait each day.
The shortfall is therefore currently around six million barrels of oil per day. That is still a significant amount, but not enough to immediately threaten the functioning of the global economy. The US currently has sufficient reserves to offset this shortfall.
Oil – and, by extension, the Strait of Hormuz – remains a concern, but the likelihood of the price skyrocketing to $140 per barrel or more under these circumstances is very low. This also explains why oil companies have not followed the trend in oil prices.
The oil industry already had access to this information, so speculation about another massive surge in oil prices is minimal. The hypothesis that we can expect a lull in hostilities and a relative abundance of oil leading up to the US elections is thus becoming increasingly likely. From this perspective, there should be no surprises.
The Magic of Memory Manufacturers
Memory prices are skyrocketing due to massive demand from artificial intelligence data centers. This is nothing new.
Shares in memory manufacturers began surging in 2025, with the rally accelerating this year. The industry is now confident enough in continued growth to publish forecasts through 2030.
SanDisk has unveiled its new roadmap. For 2028–2030, it targets revenue growth in the mid-to-high teens and an adjusted gross margin of around 80%. The gross margin is particularly important for understanding what is happening in this industry.
Memory manufacturers are classic cyclical companies in the IT sector, with demand rising and falling in regular cycles. Their revenues and profits fluctuate accordingly. With the advent of artificial intelligence, however, these traditionally cyclical companies appear, at least for now, to have become high-growth businesses.
As recently as 2024, SanDisk’s gross margin was around 16%. In other words, for every $100 in revenue, roughly $16 remained as gross profit. Today, that figure is $84, with gross margins expected to remain around 80% in the coming years.
It is like striking gold in an unexpected place. SanDisk’s stock has thus surged by 3,500% over the past year. To put that in perspective, anyone who bought $27,000 worth of SanDisk stock exactly one year ago is now a millionaire.
Only a few small cryptocurrencies can rival such growth. However, there is a major difference: unlike speculative cryptocurrencies, SanDisk’s growth is backed by fundamentals. Despite this phenomenal rise, the traditional price-to-earnings (P/E) ratio currently stands at 22.5. The stock is therefore by no means overpriced.
By the standards of AI-exposed technology stocks, SanDisk’s valuation remains relatively modest. JPMorgan has also resumed coverage of SanDisk shares with an Overweight rating and a $2,250 price target. In other words, SanDisk shares have the potential to rise by more than 40% from their current price.
Cisco Is Starting to Pay the Price for AI
SanDisk and its shareholders seem to be the clear winners for now, but their gains come at a cost elsewhere in the industry. Last week, Cisco also reported its results; the company is likewise benefiting from the artificial intelligence boom. Unlike SanDisk, however, the markets did not react positively to Cisco’s results, despite the strong numbers.
The negative reaction was triggered by a single line item in the results. The gross margin fell from roughly 68.4% to 66.3%, a year-over-year decline of 2.1 percentage points. The decline may appear modest, but the reason behind it points to a broader problem.
Margins fell due to high memory prices. SanDisk’s remarkable margin growth therefore reflects a shift in profits toward memory manufacturers and away from their customers. The memory shortage is redistributing profits within the industry. While SanDisk is posting record margins thanks to the shortage, its customers are beginning to realize that the bill for the AI revolution will be significantly higher than they expected.
