The Market's Bipolar Monday: AI Hype vs. Middle East Dread

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Friday was a victory lap. The S&P 500 and Nasdaq hit record closes, powered by a surge in software stocks that had traders practically levitating. Then Monday morning arrived with its wet-blanket news cycle: Iranian state media claimed missiles hit a U.S. warship in the Strait of Hormuz. Futures tanked. S&P 500 futures dropped 0.4%, Nasdaq 100 contracts fell 0.5%. The script flipped in about six hours.

This is what the market looks like in 2025: oscillating wildly between two competing narratives that can’t seem to coexist in the same trading session.

Photo by Ann H / Pexels

When Geopolitics Crashes the AI Party

Here’s the thing about last Friday’s rally that nobody wants to admit: it was built on the assumption that nothing bad happens. Software stocks surged. Tech in general ripped. The entire edifice of “AI will print money forever” held firm. Then some missiles got reported and suddenly people remembered that the Middle East is, well, the Middle East.

The Strait of Hormuz matters because roughly 20% of global oil passes through it. When traders think about disruption there, they don’t think about it in the abstract. They think about oil spiking, inflation returning, the Fed staying restrictive longer than expected, and growth stocks—the ones that need low rates to justify their valuations—getting absolutely hammered. One warship incident becomes a knock-on effect through seven other asset classes.

My read: the market overextended itself on Friday. Software stocks had gotten ahead of fundamentals. A geopolitical hiccup was inevitable. What matters now is whether this is a one-day wobble or the beginning of a real correction. Given that central banks are holding interest rates steady amid economic uncertainties, there’s very little cushion between “everything’s fine” and “things are tightening.”

Photo by Markus Spiske / Pexels

The Crypto Oddball

While equity futures were declining Monday, Coinbase, Robinhood, and other crypto-exposed stocks were rising. Bitcoin rallied. This is the kind of portfolio diversification that actually works—when equities fear geopolitics, crypto sometimes goes the other way because it’s uncorrelated to oil shocks and Fed policy in the traditional sense.

I think the crypto crowd is right to be positioned defensively here. If Middle East tension escalates, you’re looking at a world where central banks face conflicting pressures: inflation fears from oil spikes versus growth fears from risk-off sentiment. In that chaos, some money flows to digital assets as a hedge. Not because Bitcoin solves anything, but because it doesn’t care about the Strait of Hormuz.

The real signal will be whether crypto stays bid if oil actually spikes materially. If WTI breaks above $85, crypto should hold up. If crypto sells off with equities during an oil shock, that tells you the “safe haven” thesis was always just window dressing.

The GameStop Fever Dream

GameStop made a $56 billion takeover bid for eBay at $125 per share. Cash and stock. Let that sink in for a moment.

GameStop’s market cap is somewhere around $4 billion. eBay’s enterprise value is roughly $55.5 billion. GameStop is trying to acquire something 10x its size. With itself, mostly. This isn’t a business deal. This is a meme stock trying to become a conglomerate using its own wildly overvalued equity as currency.

Here’s my honest uncertainty: I don’t know if this is brilliant theater designed to keep the retail crowd engaged and buying shares, or if it’s genuinely delusional. Maybe both. What I do know is that if this deal somehow got financed, you’d have a $60 billion e-commerce company run by people who made their fortunes on volatility, not operations. The operational risk is staggering.

This is the market equivalent of a poker player going all-in on a hand they haven’t looked at yet. It might work. Probably won’t. Either way, it’s entertaining as hell.

The IPO Gauntlet Begins

Cerebras, an AI chipmaker, is targeting a $3.5 billion raise that could value the company at up to $24.5 billion, up from $23 billion in February. So they’re trying to go public, raise capital, and basically validate a valuation that was already assigned to them by private markets.

This is where you should start paying attention to the IPO calendar. When AI chipmakers are coming public in 2025, especially ones that are barely moving the valuation needle, it usually means:

1. Private equity is offloading risk onto public markets.
2. The smart money thinks valuations are getting frothy.
3. Retail investors are about to provide the exit ramp for people who got in at much lower valuations.

The irony is sharp: we’re told AI is the greatest opportunity of our lifetime, yet the companies building the chips are entering public markets at valuations that suggest seasoned investors don’t see enormous upside left. If Cerebras was a 10x opportunity, they wouldn’t need to go public. They’d stay private and raise at higher multiples.

Photo by Markus Spiske / Pexels

The Fed’s Independence Problem

Kevin Warsh, the Fed chair nominee, is reinterpreting what “independence” means. Former Fed officials are confused and concerned. This matters more than most people realize.

Fed independence isn’t a technicality. It’s the entire ballast that keeps markets from pricing in political interference with monetary policy. If the new chair starts redefining independence in ways that sound more like “responsive to the administration’s goals,” you’re going to see a structural repricing of risk assets. Bonds first, then equities.

Watch the Fed chair confirmation hearings closely. If Warsh signals that the Fed should be more aligned with White House priorities, expect Treasury yields to rise materially. A Fed that bends to political pressure is a Fed that can’t fight inflation credibly. Markets will demand higher yields to compensate.

Spirit Airlines and the Bailout That Wasn’t

Spirit Airlines shut down overnight after a failed government bailout. This is a footnote in financial news, but it’s the kind of footnote that matters during correction cycles. When smaller companies can’t access credit or government support, it’s a sign that the financing environment is tightening faster than we’re admitting.

The airline failed because travel demand wasn’t there at prices that covered costs. Government said no to a bailout. Economy said no to paying more. Spirit got crushed in between. This is what happens when financial conditions tighten—the weakest players disappear first.

What I’m Watching

• Oil prices this week: If WTI stays below $80, the Iran story was overblown. If it breaks $85, we’re entering a genuine risk-off environment where crypto plays as hedge and equities grind lower.

• Cerebras IPO roadshow reception: Pay attention to the book-building process and what price they end up at relative to that $24.5 billion target. If they get dragged down below $22 billion, it signals institutional investors are skeptical on AI valuations broadly.

• Kevin Warsh’s first major statement on Fed independence: The exact language he uses matters. Watch for phrases that suggest political responsiveness versus technical autonomy. If it sounds like he’s negotiating rather than explaining, the bond market will price it immediately.

• GameStop’s actual M&A execution: If they announce debt financing or an equity offering to fund the eBay deal, that’s your signal the meme has officially jumped the shark. If it quietly dies, you’ll know retail finally ran out of dry powder.

The market’s personality has shifted. It’s no longer content with single narratives. We’re living in a world where software surges on Friday and geopolitics crater futures on Monday, where GameStop tries to buy eBay, where AI chipmakers go public just as the valuation pressure mounts. It’s coherent chaos. Stay positioned for whiplash.