U.S. stocks are poised for a lower open as Middle East war risk keeps Brent crude above $100 a barrel and pressure builds on corporate guidance. IBM and ServiceNow reignited AI/software concerns, while Honeywell and American Airlines cut outlooks amid war-related disruption and sky-high fuel costs. Offsetting that, SK Hynix, Texas Instruments and Lam Research pointed to robust AI/data-center demand, and Netflix authorized an additional $25 billion buyback.
The key near-term regime shift is not “earnings are bad,” but that cost pressure is starting to bite while revenue visibility is shortening. That combination is toxic for cyclicals and software at the margin: when customers hesitate, vendors lose pricing power first, then lose volume later, which is why guidance slippage can cascade across names that otherwise have different end markets. The market is still pricing in an AI-led capex boom, but the first-order beneficiaries are now the picks-and-shovels suppliers with actual shipment constraints and backlog durability, not the software layer that depends on conversion velocity.
The semiconductor read-through is more important than the headline beat/miss mix. Tight HBM and WFE conditions imply capacity is still underbuilt relative to AI demand, which supports equipment and materials names even if select chip designers become more volatile. The second-order loser is likely software infrastructure with large enterprise deal sizes: higher rates, geopolitics, and budget scrutiny increase the probability that customers defer multi-quarter rollouts, while smaller, usage-based vendors can still hold up better than the big-ticket platforms.
On the consumer/transport side, elevated fuel and input costs create a slow-burn margin squeeze rather than an immediate demand collapse. That argues for patience in airline shorts and for favoring companies with fee-based or asset-light pricing power over those exposed to commodity-linked operating leverage. Separately, buybacks from cash-generative names matter because they put a floor under earnings-per-share growth even if top-line momentum is uneven; in this tape, capital return is increasingly becoming a differentiator versus pure growth stories.
The contrarian setup is that the market may be too quick to extrapolate “AI winners” from software weakness. If the next few PMI prints confirm input inflation but also show output prices rising, investors will rotate toward firms with direct monetization of compute and data-center spend, while punishing enterprise software on delay risk. That favors owning the physically constrained infrastructure complex and fading the high-multiple software basket on rallies until deal conversion stabilizes.
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