Is the AI Trade Back? US CPI Is the Test: Week Ahead 10 Aug

The week ahead – 10th August 2026
Author: Michael Hewson   

Is the AI trade back after last month's sell-off?

Quick answer: Yes — August has seen a sharp reversal in sentiment, with the S&P 500 at new record highs and the Nasdaq recovered from correction territory. But the rebound is selective rather than broad.

After a really bruising month for South Korean stock markets and the humbling of investment fund “Situational Awareness” it would seem that the AI trade is back in vogue once more.

From a narrative that saw this sector take an absolute battering on concern over sky-high valuations and out-sized capex spend, August has seen a sharp reversal in sentiment which rather begs the question, why the sudden rebound?

Was last month’s sell-off a well overdue clear out of over leveraged longs, or merely a case of some well overdue profit taking?

Key takeaways

·        The AI trade has rebounded sharply in August, with the S&P 500 back at record highs and the Nasdaq out of correction.

·        Investors are becoming more discerning within the Mag 7 — cloud strength was rewarded, cost concerns were punished.

·        US CPI for July on 12 August is the only significant macro release in an otherwise thin week.

·        Three FOMC members dissented in favour of a 25bps hike, making this CPI print unusually consequential.

·        Five events dominate the week: US CPI, UK Q2 GDP, and earnings from IHG, SuperMicro and Cisco.


Certainly, the share price reaction to some of the Mag 7 numbers shows investors are becoming more discerning, and consequently it could be argued that it’s probably a bit of both.

Microsoft’s numbers, along with that of Amazon and Alphabet got rewarded for significant improvements in their cloud business, in sharp contrast to Meta and Apple, whose shares saw big falls over concerns over lower revenues, as well as higher costs.

Nonetheless we have seen bullish sentiment reassert itself with the S&P500 back at new record highs, while the Nasdaq has recovered from correction territory. We’ve also seen European markets continue to reap the benefits of outflows from the AI trade, with new record highs of their own.

What does this mean going forward as we venture further into earnings season?

What should traders take away from this week's review?

·        Treat 12 August as the week's pivot. US CPI is the main scheduled catalyst; the rest of the calendar is thin, so positioning around it carries more weight than usual.

·        Watch oil, not just the headline print. July's sharp rise in oil prices has the capacity to undo June's gasoline-driven disinflation if sustained.

·        Expect less hand-holding from the Fed. With guidance being withheld, price risk yourself rather than waiting to be told.

·        Separate AI revenue from AI spend. SpaceX, SuperMicro and Cisco all report into the same narrative but sit at very different points on the scale-versus-return question.

·        Note the UK base effect. Strong March and Q1 figures drop out of the June numbers, so a sharp slowdown in the April–June print is arithmetic, not necessarily deterioration.
Key Market Highlights

What did SpaceX's Q2 numbers say about AI spending?

Quick answer: Revenue is improving fast — up 92% on the quarter — but AI spend of $15.8bn out of $18.37bn keeps the sustainability question open, and that gap is what is dividing opinion on the shares.

This week’s Q2 numbers from SpaceX appear to show us that while the revenue outlook is rapidly improving with a 92% increase in quarterly revenues, along with an improvement in losses, there remains a thread of uncertainty about the sustainability of its AI spend, which rose to $15.8bn out of a total of $18.37bn.

Elon Musk went on to reveal that he intends to continue spending money as he looks to rapidly expand AI computing capacity from its current 1.4GW, to at least 10GW by next year. This part of the business saw SpaceX generate $2.5bn in revenue during the quarter by selling computing capacity to the likes of Google and Anthropic, even as it booked a $1.2bn loss.

It is this ability to scale up at speed, while also being able to generate a swift return that appears to be behind the recent share price weakness in SpaceX, not to mention what might happen once the first share price lock-ups expire.

It’s this gap between what SpaceX can deliver now, and what it might be capable of in the future that appears to be dividing opinion, and while it may be foolish to bet against Musk in the long run, that doesn’t mean the shares might not fall even further from their recent lows.

What macro data is out this week?

Quick answer: Very little. US CPI for July is the main item of note, and the question is whether it shows further evidence of slowing price pressures.

In a week where macro data is thin on the ground, the main item of note is US CPI for July, and whether we will see further evidence of slowing price pressures.

This matters, given the recent dissent of three FOMC members in favour of a 25bps rate hike.

Is the Fed making life harder for traders by withholding guidance?

Quick answer: Some market participants think so. The counter-argument in this review is blunt: pricing risk is the trader's job, not the central bank's.

With Fed chairman Kevin Warsh insistent on depriving the markets of future guidance on rate moves, as well as looking across a variety of data points when it comes to setting policy, there are some who are complaining that he is making their lives more difficult.

Well, boo-hoo, it’s not the Fed’s job to hand hold market participants' hands when it comes to pricing risk.

Pre-financial crisis this didn’t happen, and for far too long now we’ve had a generation of traders and investors who’ve been brought up to believe that it’s the central banks job to make their lives easier.

The reality is that it isn’t, and the sooner these market professionals improve their situational awareness (pun intended) and stop moaning, the better.

What are the five financial key events in the week ahead of August 10th?

Quick answer:
US CPI (12/08),
UK Q2 GDP (13/08),
and earnings from IHG (11/08),
SuperMicro (11/08) and Cisco Systems (12/08).

We covered them all for you below.

Will US CPI show inflation is still cooling?

Quick answer: June's print slowed more than expected, to 3.5% annually from 4.2%, driven by the sharpest fall in gasoline prices since 2022. The risk to July is that July's oil rally undoes some of that.

US CPI (Jul) – 12/08 – having seen US CPI slow more than expected in June, there is hope that price pressures in the US economy may have peaked in the short term. On a month-on-month basis prices fell -0.4%, while on an annual basis the slowdown was even starker, coming in at 3.5%, slipping from the 4.2% seen in May. The slowdown was primarily driven by a sharp slowdown in gasoline prices, which fell at their sharpest rate since 2022. While a welcome boost for US consumers, the recent sharp rise in oil prices in July has the capacity to undo some of that boost if the move is sustained. While we’ve seen a modest pull back from the recent highs the bigger concern is that the sustained volatility in prices could mean prices stabilise at a higher baseline. These are the concerns that prompted the likes of the 3 dissents on interest rate policy at the recent Fed meeting which saw Hammack, Kashkari and Logan vote for 25bps rate hike. Core CPI also slowed, coming down to 2.6% from 2.9%, while month on month coming in unchanged. We also saw evidence of slowing PPI inflation in a sign that price pressures have peaked here as well with these numbers being released on the 13th August, and US retail sales for July on the 14th.

What this means for traders: This is the week's highest-impact release. Watch whether core holds its slowdown from 2.9% to 2.6%, and treat oil as the swing factor — a higher price baseline is the concern that drove three Fed dissents. PPI on 13 August and retail sales on 14 August follow as confirmation.

Will UK Q2 GDP show the economy is still stalling?

Quick answer: Expect a sharp slowdown. The 0.7% three-month figure is flattered by strong March and Q1 numbers that drop out of the June data.

UK Q2 GDP – 13/08 – as we look at the latest Q2 GDP numbers for the UK economy, recent growth has been lacklustre to say the least. In the most recent monthly numbers, the UK economy managed to eke out a 0.1% expansion in May, but it was very much slim pickings, reversing the -0.1% contraction in April. Industrial production declined -0.5%, while manufacturing slowed to 0.1%. Construction output collapsed to -0.8%, while services did the heavy lifting, expanding 0.3%, driven by R&D in science and medical activities, as well as retail spending due to the warm weather as well as two bank holidays. Over the 3-months to May the economy expanded by 0.7%; however this number is skewed due to the strong numbers seen in March and Q1, which will fall out of the numbers for June. This means we can expect to see a sharp slowdown for the 3-months between April and June, when we get the latest figures from the ONS later this week.

What this means for traders: The headline weakness is partly a base effect rather than fresh deterioration, so read the composition rather than the number — services carried growth while construction collapsed at -0.8%. Sterling and UK rate expectations are the transmission points.

 

What should traders expect from IHG's H1 results?

Quick answer: Momentum has been strong — Q1 global RevPAR grew 4.4% — and the FIFA World Cup is expected to have supported an already strong US market through Q2.

IHG H1 26 – 11/08 – When Holiday Inn owner IHG reported its full year numbers back in February the numbers were impressive. A 5% increase in full year revenue to $5.19bn, saw operating profits rise by 15% to $1.2bn. The annual dividend was higher by 10% at 184.5c a share, with a final dividend of 125.9c, while share buybacks made up another $900m, with net det also higher by 20% to $3.33bn. On a sectoral basis there was growth on RevPAR with the Americas +0.3%, EMEEA +4.6%, with Greater China continuing to lag coming in at -1.6%, translating into global RevPAR of 1.5%. For 2026 the hotel chain said it would be looking to buy back another $950m of its own shares. In Q1 this trend continued with global RevPAR growth of 4.4%, aided by a strong US market, with hopes high that this market would do even better in Q2, with the FIFA World Cup expected to drive a good year, compared to the turbulence of Q2 and Q3 2025. Even in EMEEA which includes the UK trends continue to look robust even if the UK continues to lag behind Europe, 1.1% in 2025, compared to 5.4% in Europe. Greater China is also expected to improve on the -1.5% seen in 2025.

What this means for traders: Watch RevPAR by region. Greater China is the laggard expected to improve on -1.5%, and the UK continues to trail Europe at 1.1% against 5.4%. The $950m buyback programme is the other line to check for confirmation.

Why has SuperMicro lagged the rest of the AI trade?

Quick answer: Not for lack of growth — Q3 revenue rose 123% to $10.2bn. The drag is a $7bn capital raise on top of governance concerns and a co-founder's resignation following a federal indictment.

SuperMicro Q4 26 – 11/08 – with all the hype around the AI trade and the gains seen across most of the sector one company’s share price performance has missed out somewhat when compared to the huge gains seen by most of its peers. At its most recent trading update back in May the shares saw a strong run higher after reporting a 123% increase in revenue to $10.2bn for Q3, while an improvement in gross margins to 9.9% drove profits up by $82m from Q2 to $483m. On guidance for Q4 the company projected between $11bn and $12.5bn in revenue and an EPS midpoint of 60c a share. This strong performance helped push the shares to their highest levels in almost a year, however the decision to announce yet another capital raise sent the shares sharply lower, which coming on top of a number of other governance concerns over the years has helped steer investors away. Announcing a $7bn capital raise to fund its AI backlog after receiving $39bn in AI server orders in recent weeks. The capital raise has raised concerns that on top of its recent legal troubles it could have trouble sustaining its margins. The main issue facing SuperMicro at the moment isn’t so much about its ability to grow its revenues, it’s more to do with trust in the management after one of its co-founders resigned after he was named in a federal indictment over allegations of smuggling AI chips into China.

What this means for traders: The question here is trust in management and margin sustainability, not demand — the company holds $39bn in AI server orders. Check Q4 revenue against the $11bn–$12.5bn guidance and the 60c EPS midpoint, and watch gross margins against the 9.9% seen in Q3.

Can Cisco keep its AI order momentum going?

Quick answer: Guidance points that way — Q4 revenue of $16.7bn to $16.9bn is expected, after AI infrastructure order forecasts were nearly doubled to $9bn.

Cisco Systems Q4 26 – 12/08 – back in May, Cisco shares surged to fresh record highs and has stayed at around those levels since then, after reporting record Q3 revenues of $15.84bn, an increase of 12% and net income of $3.37bn. The company said it had received $5.3bn in AI infrastructure and hyperscalers orders so far this year, as well as raising its expected orders in this area to $9bn, almost double the previous forecast of $5bn. Its networking revenue also surged during the quarter, rising 25% to $8.82bn. For Q4 Cisco said it expects revenues of between $16.7bn and $16.9bn in revenue and earnings per share of $1.17 mid-point. Cisco also said it would be cutting its headcount by around 4,000 workers.

What this means for traders: Cisco is the steadier AI read in this week's set: record Q3 revenue of $15.84bn, networking up 25%, and shares holding near highs since May. Watch whether the $9bn AI order forecast is raised again, and how the 4,000-role headcount cut is framed against margins.

FAQs

What is the most important economic release this week?

US CPI for July, released on 12 August. Macro data is otherwise thin on the ground this week, which concentrates attention on a single print. June's reading slowed more than expected to 3.5% annually from 4.2% in May, with core easing to 2.6% from 2.9%. The question for July is whether that disinflation continues or whether rising oil prices reverse it.

Why did AI stocks rebound in August?

After a bruising month driven by concerns over sky-high valuations and out-sized capex spend, sentiment reversed sharply. The S&P 500 returned to record highs and the Nasdaq recovered from correction territory. The rebound looks like a mix of an overdue clear-out of over-leveraged longs and profit-taking, with investors now distinguishing between companies on cloud performance and cost control.

Which companies report earnings in the week ahead?

Three: IHG reports H1 2026 results on 11 August, SuperMicro reports Q4 on 11 August, and Cisco Systems reports Q4 on 12 August. IHG offers a read on global travel demand and RevPAR by region, while SuperMicro and Cisco both sit inside the AI infrastructure narrative from opposite ends of the trust spectrum.

Are three Fed dissents unusual, and why do they matter?

Hammack, Kashkari and Logan all voted for a 25bps rate hike at the recent meeting, which signals genuine division on the committee about whether price pressures have peaked. It matters this week because it raises the stakes on the CPI print — a hotter number strengthens the dissenting case, while continued cooling weakens it.

Why is the Fed not giving forward guidance?

Fed chairman Kevin Warsh is deliberately withholding future guidance on rate moves and looking across a variety of data points when setting policy. Some market participants have complained that this makes their job harder. The view taken in this review is that pricing risk is the market's own responsibility, and that pre-financial-crisis markets operated this way as a matter of course.

Should traders be worried about SuperMicro's capital raise?

It is the central concern. The $7bn raise, announced to fund an AI backlog after $39bn in server orders, sent shares sharply lower because it came on top of existing governance concerns. Combined with a co-founder's resignation after being named in a federal indictment over alleged AI chip smuggling to China, the issue is management trust and margin sustainability rather than demand.

What could derail the improvement in US inflation?

Oil. June's slowdown was primarily driven by gasoline prices falling at their sharpest rate since 2022, and July saw a sharp rise in oil prices. Even with a modest pull back from recent highs, the larger concern is that sustained volatility leaves prices stabilising at a higher baseline rather than continuing to fall.