Author: Tide Research
On Wednesday (June 10, Eastern Time), Wall Street was squeezed from two fronts: inflation rebounding to 4.2% and escalating tensions between the U.S. and Iran. At closing, all three major indices ended near their intraday lows.
The Dow Jones Industrial Average plunged 953.33 points (-1.87%) to 49,918.78, breaking below the key 50,000 level. Recall that on June 4, the Dow reached an all-time high—within just one week, the narrative of blue-chip stocks as a "safe haven" has been thoroughly debunked. The S&P 500 fell 1.62% to 7,266.99, while the Nasdaq dropped 1.98% to 25,169.50, retreating approximately 7% from its all-time peak of 27,086.81 on June 1. The Russell 2000 Index declined only 1.10%, making it the best-performing major index on the day.
The VIX fear index surged 11.83% in a single day to 22.22, reclaiming the 20 alert level.
Inflation and war: a new chapter in an old script
The May CPI, released in the morning, rose 4.2% year-over-year, hitting a three-year high, and increased 0.5% month-over-month. The numbers were disappointing but in line with market expectations, as core CPI rose only 0.2% month-over-month, below forecasts. The bond market’s reaction speaks volumes: the 10-year U.S. Treasury yield touched 4.55% during the session before pulling back to 4.52%, essentially unchanged. In other words, the CPI data alone was not enough to trigger this sell-off.
What truly ignited the sell-off was the geopolitical news in the afternoon. After Iran shot down a U.S. Army Apache helicopter, U.S. forces launched a "defensive strike" on Tuesday evening, prompting Iran to attack U.S. facilities in Gulf nations including Bahrain, Jordan, and Kuwait. On Truth Social, Trump stated that Iran had "delayed negotiations for too long and now must pay the price," adding that the U.S. would "strike them very hard." Upon the news breaking, sectors gradually turned from red to green: the industrial sector fell over 3%, while technology and materials sectors dropped more than 2%.
WTI crude oil settled up 2.07% at $90.03 per barrel, while Brent rose 1.8% to $93.10. Oil prices and inflation fuel each other—a combination markets least want to see: interest rate futures show a 25-basis-point hike in December is fully priced in. By 2026, U.S. equities will be facing a Fed discussing "rate hikes" rather than "rate cuts." This is the true Sword of Damocles hanging over valuations.
AI giants are lining up to ask for money
If the macro environment is the background music, then this week’s main theme in U.S. stocks was something else: the AI arms race has started burning cash at the expense of shareholders.
Super Micro Computer (SMCI) plunged 27.98% to $29.27 on Wednesday, posting a catastrophic single-day decline. The trigger was the company’s announcement of a fundraising effort of up to $7 billion, including a $5 billion underwritten public offering and a $2 billion at-the-market (ATM) offering, to finance the purchase of components to fulfill customer orders. For an AI server company that needs to dilute nearly one-third of its market value just to fund inventory for orders, the market quickly priced in the reality.
Philadelphia Semiconductor Index suffers broad declines: Broadcom down 5.12%, TSMC down 4.44%, NVIDIA down 3.73%, Micron down 4.70%, Tesla down 3.80%. Apple逆势微涨 0.35%, with the rationale being straightforward: among the seven giants, it carries the lightest capital expenditure burden.
After hours, the real star took the stage. Oracle’s Q4 earnings report was nearly flawless: revenue reached $19.2 billion, up 21% year-over-year and exceeding expectations; non-GAAP EPS came in at $2.11, higher than the expected $1.97; remaining performance obligations (RPO) surged by $85 billion in a single quarter, rising from $553 billion to $638 billion. Yet, the stock dropped more than 7% in after-hours trading.
The reasons lie in three other figures: cloud revenue fell short of expectations; free cash flow for fiscal year 2026 was negative $23.7 billion; and the company announced it would refinance approximately $40 billion through a mix of equity and debt to fund data center construction. Two months ago, this company laid off 30,000 employees.
Looking at this week’s clues together: Alphabet is seeking $85 billion in financing, Super Micro is issuing $7 billion in additional shares, and Oracle is taking on another $40 billion in debt. The AI narrative is shifting from “how big are the orders?” to “where is the money coming from?” The market once cheered every dollar of RPO; now it’s asking about the payback period for every dollar of capital expenditure. Oracle’s $638 billion order book sitting alongside a -$237 billion cash flow on the same balance sheet captures the entire contradiction of AI trading in June 2026.
Where did the funds go?
The selling isn't indiscriminate. Coca-Cola and TJX both hit all-time highs on Wednesday, despite market headwinds, and Morgan Stanley named Coca-Cola as its sector favorite that day. Selling AI hardware while buying companies that sell soda and discounted apparel reveals a clear, almost harsh, path of capital flight to safety. The Russell 2000’s minimal decline further confirms this: small caps barely participated in the AI rally, so they now carry the lightest retracement burden.
Selling pressure also spread to Asia: South Korea’s KOSPI plunged 4.5%, led by declines in Samsung Electronics and SK Hynix; the Nikkei 225 fell 1.9%, with SoftBank Group down 8.3%. The deleveraging of the AI supply chain is global.
According to Tide Research, the nature of this downturn is more akin to a resonance between the "AI credit cycle" and the "geopolitical inflation cycle," rather than a single-event shock. The former determines whether capital markets will continue to fund technology companies' capital expenditures, while the latter dictates the direction of risk-free interest rates. Both factors deteriorated simultaneously this week, which is the fundamental reason for the Nasdaq's persistent outflows since June 5.
Also consider the counterpoint: Core inflation, a component of CPI, rose only 0.2% month-over-month, indicating that energy shocks have not yet significantly transmitted to service prices; Oracle’s cloud infrastructure revenue growth remains robust at 93%, signaling genuine demand; historically, risk assets have typically recovered within weeks following escalations in Middle East conflicts. If Thursday’s PPI comes in mild, combined with any signs of de-escalation in Iran’s situation, a oversold rebound could emerge at any time.
But there is a structural shift: AI giants have moved from building data centers with profits to building them with equity and debt—a step that is difficult to reverse. As financing markets begin to price risk premiums for AI capital expenditures, the valuation anchor has changed.
The next test is on Thursday: the PPI data and the market’s digestion of Oracle’s guidance for fiscal year 2027. Between order backlog and cash flow, which will Wall Street ultimately choose to believe?