10 things to watch in the stock market Friday including the AI race and dealmaking

Key developments include Home Depot's bid for GMS Inc following QXO's offer, Google's use of YouTube data for AI model training, and Meta's strategic AI talent acquisitions. SoftBank is reportedly seeking a partnership with TSMC for a $1 trillion AI and robotics factory in Arizona, while Nvidia and Foxconn discuss deploying humanoid robots. Darden's shares rose after exceeding Q4 sales and earnings estimates, and Morgan Stanley is "tactically bullish" on Micron due to AI spending acceleration, with Wedbush raising its price target to $150.

Analysis

The market exhibits a moderately positive sentiment, influenced by Fed Governor Christopher Waller's indication of a potential interest rate cut as early as July, even as geopolitical tensions surrounding the Israel-Iran conflict persist, causing fluctuations in oil futures. Significant M&A activity is underway: Home Depot has submitted a bid for GMS Inc., challenging QXO's earlier $5 billion offer, though this raises concerns about a potential bidding war. In contrast, Dover Corporation completed a strategic acquisition of IPP, a German hygienic pump manufacturer, to bolster its Pumps & Process Solutions segment, particularly in the food, beverage, and pharmaceutical industries. The artificial intelligence sector remains a focal point of intense activity and investment. Google is utilizing YouTube content to train its AI models, showcasing how tech giants leverage proprietary data. Meta Platforms is aggressively acquiring AI talent, including Alexandr Wang from Scale AI and reportedly Daniel Gross and Nat Friedman, after an unsuccessful attempt to acquire Safe Superintelligence. Further underscoring AI's prominence, SoftBank is reportedly exploring a $1 trillion partnership with Taiwan Semiconductor Manufacturing Co. for an AI and robotics factory in Arizona, while Nvidia and Foxconn are discussing the deployment of humanoid robots in Nvidia's AI server manufacturing facility. Corporate earnings and outlooks present a mixed but generally positive picture: Darden Restaurants' shares rose over 2% after its Q4 sales and earnings surpassed estimates, though its fiscal 2026 earnings guidance was slightly underwhelming. Eli Lilly reported a "positive" launch of Mounjaro in India, with sales reportedly increasing 60% from April to May. In the semiconductor space, Morgan Stanley expressed a "tactically bullish" stance on Micron Technology ahead of its earnings, citing accelerated AI spending, and Wedbush raised its price target on Micron to $150, noting positive pricing trends, despite the stock's near 90% appreciation since early April.

Key Decisions for Investors

• Investors should closely monitor developments in Home Depot's (HD) bid for GMS Inc. (GMS), as competitive bidding situations can impact acquisition value, and assess the strategic fit against the potential cost.
• Consider re-evaluating positions in major technology firms like Meta (META), Google (GOOGL), and Nvidia (NVDA) given their aggressive AI strategies and investments, while noting Apple's (AAPL) ongoing need to demonstrate more tangible progress in leveraging its data for AI.
• For Micron (MU) shareholders, the upcoming earnings report is critical; while analyst sentiment is positive due to AI demand, the stock's significant recent rally warrants a careful risk-reward assessment, especially considering Morgan Stanley's hold-equivalent rating.
• Opportunities may exist in companies with specific growth catalysts, such as Eli Lilly (LLY) capitalizing on its Mounjaro drug launch or Dover (DOV) benefiting from targeted acquisitions that enhance market share in specialized industrial segments.
• Factor in potential market volatility stemming from geopolitical events affecting energy prices, alongside the broader economic implications of any confirmed Federal Reserve monetary policy shifts towards rate cuts.