SpaceX and Tesla launch Terafab, a $16.8 billion chip foundry in Texas, positioned as the world's largest and most advanced semiconductor manufacturing facility.
**Federal Reserve Developments**
Federal Reserve official Musalem indicated that the probability of inflation remaining above target has risen, expressing an inclination toward rate hikes at the recent meeting. The hawkish remarks reinforce September rate-hike expectations, exerting near-term pressure on high-valuation tech stocks while supporting the dollar and precious metals.
**Strait of Hormuz Negotiations**
Trump stated that the Hormuz deal has not yet been formally reached, with the Strait remaining "somewhat open." Uncertainty around the strait negotiations persists. Oil prices rebounded sharply on Thursday as the geopolitical risk premium rose again, increasing near-term crude volatility. Saudi warnings of potential attacks further pushed the geopolitical risk premium higher and drove a sharp rebound in crude. Gold consolidated near the $4,300 level after its earlier surge, while silver edged higher. Rising uncertainty over the strait supports higher oil prices, which correlate with marginal rebound in inflation expectations and renewed discussion of Fed rate hikes, with precious metals oscillating at elevated levels amid the interplay of safe-haven demand and real rates. Near-term commodity moves will depend heavily on the non-farm payrolls data and actual progress on Hormuz.
**Tariffs and Supply-Chain Policy**
Trump imposed tariffs on polysilicon and banned exports of tungsten and battery scrap. These tariffs and export bans reinforce supply-chain localization policies, benefiting domestic U.S. industries but potentially raising costs for solar and semiconductor sectors. The Terafab project underscores demand for AI compute self-sufficiency.
**Cryptocurrency Markets**
Against a backdrop of rising geopolitical risk and mixed U.S. equities, the crypto market held relatively steady. Bitcoin remained above $64,000 while Ethereum showed limited elasticity. The shift of ETF flows to net inflows provided support, and liquidation volumes stayed manageable. Macro conditions—rebounding oil prices alongside pre-non-farm caution—point to a near-term range-bound crypto market. Attention remains on how the payrolls data will transmit to risk-asset sentiment.
**Equity Markets**
U.S. equities closed lower across the board on Thursday, with the Dow retreating notably from its record high. Microsoft rose nearly 2% and showed relative strength; Nvidia, Apple and Meta posted modest gains. Google continued to face pressure, while Tesla and Amazon edged lower. Pre-non-farm caution dominated sentiment. AI application software stocks weakened broadly, and the memory sector continued to adjust after earlier guidance misses. SpaceX rose more than 6% on the Terafab project announcement.
**Terafab: SpaceX and Tesla's Advanced AI Semiconductor Complex**
SpaceX and Tesla formally announced the launch of the Terafab advanced AI semiconductor complex in Grimes County, Texas, with an initial investment of $16.8 billion. The facility is planned to become one of the world's largest chip manufacturing sites, spanning over 100 million square feet. It will vertically integrate logic, memory, packaging and testing, primarily serving Tesla's Optimus humanoid robots, Cybercab and SpaceX's space-based data centers. Elon Musk described it as "the largest and most valuable building on Earth" and indicated that roughly 25% of future compute output would be allocated to Optimus and 75% to spacecraft AI projects.
The project directly reflects the Musk companies' urgent need for AI compute self-sufficiency and underscores ongoing global shortages of advanced chips, particularly leading-edge process nodes and HBM. The $16.8 billion initial outlay is substantial, with further expansion potential, reinforcing the long-term narrative of vertical integration and in-house capacity. The market views it as a hedge against external reliance on Nvidia and others, while also potentially reshaping parts of the supply chain. Long-term implications are positive for related equipment, materials and packaging/test supply chains, and strengthen the compute self-sufficiency thesis. Near-term attention should focus on the pressure of large capital expenditure on free cash flow at both companies, as well as project execution timeline and yield-ramp risks.
**Memory Sector Under Pressure**
Following earlier guidance that fell short of elevated market expectations, Western Digital shares fell more than 13% and SanDisk nearly 7%, keeping the broader memory sector under pressure. Both companies had reported strong quarterly results, but the midpoint of next-quarter revenue guidance came in below the Wall Street consensus that had been sharply raised on AI-storage optimism. High-valuation memory names remain extremely sensitive to expectation gaps. Capital had already fully priced in optimistic AI data-center storage demand; when guidance failed to further reinforce that narrative, profit-taking unfolded rapidly. Ahead of the non-farm report, risk appetite declined and previously strong performers became primary targets of selling, illustrating that the memory sector is still in a "high-expectation, high-volatility" trading phase. The medium- to long-term AI storage demand thesis remains intact, with enterprise SSD and HBM-related demand still resilient. Near-term price action will be driven more by sentiment and valuation digestion; subsequent actual shipment data will be key to validating earlier elevated expectations.
**Nvidia's HBM Adjustment**
According to The Information, Nvidia is considering adopting a lower high-bandwidth memory (HBM) capacity than originally planned for its next-generation Rubin Ultra chip to address ongoing shortages of advanced HBM. The company has tested at least three versions over the past several weeks, some with memory configurations below initially disclosed specifications. Reduced memory may affect single-card performance, although Nvidia can partially offset this through other architectural optimizations; customers running large models may need to deploy more chips.
The adjustment directly exposes a critical bottleneck in the current AI compute expansion—advanced HBM supply cannot fully match chip design requirements. While software and system-level optimizations can partially mitigate the impact, the change may still raise customers' total cost of ownership and deployment complexity. The market interprets this as a supply-chain constraint on hardware delivery cadence rather than a weakening of demand. The long-term AI compute demand thesis remains solid, but supply-chain bottlenecks may affect near-term delivery schedules and customer experience. Continued monitoring of HBM supply improvements and Nvidia's alternative solutions is warranted.
**Microsoft's Outperformance**
Microsoft shares rose approximately 2%, outperforming most peers amid broader tech pressure and rising pre-non-farm caution. Microsoft's sustained outperformance in Azure cloud growth and tangible AI commercialization progress have positioned it as one of the higher-certainty names within the tech sector. In a period of declining risk appetite when capital prefers "defensive growth," cloud and software giants with clear revenue-realization paths tend to receive a relative premium. This stands in contrast to the pullbacks seen in certain hardware and high-valuation software stocks. Earnings delivery capability remains the core pricing standard in the current market. Subsequent attention should focus on whether cloud growth can continue to absorb capital expenditure and on the visibility of AI-related revenue contribution.
**Alphabet Faces Headwinds**
Alphabet shares fell approximately 1.3%, extending the adjustment triggered by a major leadership reshuffle in its AI division, making it one of the weaker large-cap tech performers. Organizational changes at a time of intense AI competition are readily amplified by the market as signals of strategic execution or internal priority shifts. Investor concerns about product delivery cadence, cloud-business synergy and competitive gaps have risen, prompting short-term capital outflows from certain software and search-related names toward higher-certainty hardware or cloud providers with already-delivered results. Continued monitoring of the new leadership's concrete progress on Gemini, AI product commercialization and cloud business is required.