Chips are down 17% and Bitcoin is up 9% and somehow Apple's all-time high is the boring part · Daily Briefing

In 30 seconds: Semiconductor stocks have fallen ~17% month-to-date with major names 10%+ below their 50-day moving averages, while Bitcoin, Ethereum, and AI-related assets are rallying, and commentators debate whether the AI boom's extreme volatility signals a bubble or a structural economic shift. China faces multiple fronts of pressure including state funds buying ~$9B in equities to prop up a falling market, rare earth export restrictions hitting Japan, a TSMC trade-secret indictment, increased military vessel activity around Taiwan, and growing European recognition of the second China shock's impact on industry. The Strait of Hormuz oil flow has collapsed to ~4 million barrels per day amid the Iran conflict, with cascading effects including a Houthi maritime embargo on Saudi Arabia, disrupted Russian refinery capacity from Ukrainian strikes, and rising US oil rig counts in response to higher prices. Brad Setser highlights that Japan's current account surplus — now larger than China's at 5% of GDP and driven entirely by investment income — poses difficult questions for the IMF's upcoming external sector report, with yen weakness and fiscal consolidation advice working at cross-purposes.

Semis $SOX is down 17.0% month to date, with biggest semis ending last week largely oversold with the year's biggest winners 10%+ below their 50-DMAs. The divergence with crypto is stark: Bitcoin $IBIT is up 9.4% over the same window. The selling has not discouraged buyers of the fund that tracks the sector. Space-related stocks dropped 10-20% last week and now sit 30-45% below their 50-day moving averages. Meanwhile Apple reached a new all-time high, and is now on the cusp of overtaking Nvidia as the most valuable company in the world for the first time since May 2025. It was, by one account, the least discussed or exciting new high in history. On the crypto side, $ETH is strengthening as 'AI downstream' assets gain traction.

The question, as always, is whether a sovereign bid can substitute for organic demand or merely sets a higher floor from which to fall again. The pressure is not only financial. Taiwan prosecutors on Monday indicted a former TSMC deputy manager for stealing trade secrets involving national core technologies — the first case brought under the National Security Act involving chip trade secrets. On the raw-materials front, China's exports of controlled rare earths and minerals to Japan were tiny again in June, extending the fallout from a bilateral diplomatic spat. The German Chancellor is now speaking clearly about the impact of the second China shock on Germany's automotive industry, laying the ground for a subsequent shift in policy. The shift was not led by the German multinationals — VW, BMW, Mercedes — who have focused more on preserving their in-China businesses. It instead came from academics and the parts supply chain. Gold: $4,010.00.

The Strait of Hormuz is now moving roughly ~4 million barrels per day on a trailing 10-day average basis, the lowest since late-May. That is not a number anyone wanted to see. Brent crude is up almost 15% since the ceasefire was declared over earlier this month. Start with the chokepoint itself. The lowest paid seafarer, earning $1,500 per month, now collects a bonus of ~$9,000 per round crossing. A captain on $15,000 a month gets ~$90,000. Then add a second front. The Houthis of Yemen have announced a maritime embargo against Saudi Arabia, effective immediately. Russia share of global seaborne diesel trade: around 11%. Not every flow is broken. Omani exports have proven not materially disrupted by the Iran War/Hormuz stoppage. The U.S. supply response is visible. Oil drilling rigs have climbed to 447 so far in July, the highest monthly average count in fourteen months, up from a trough of 409 in February. Iran is not militarily superior to the United States but knows how to hit America's pressure points. Higher gas prices and inflation mean a rockier road to midterms for President Trump.

The IMF is set to publish its external sector report in a couple of weeks, and Japan presents it with a genuinely awkward problem. Japan's current account surplus is technically bigger than China's reported surplus, at 5% of Japan's GDP. That is a striking headline, but the composition of the surplus matters more than the size: Japan's surplus is ALL from investment income, not from trade, and unlike China, its investment income balance is honestly reported. The surplus swelled as interest income rose with the rise in global interest rates, which mechanically boosted the returns on Japan's enormous stock of overseas assets. You can see this in the reserves alone. Japan's interest income on its reserves ran at roughly $36 billion over a year, implying a return of about 3.2% on the portfolio. Japan's interest income on its reserves can be inferred from the growth in BoP reserves over 4qs without intervention, a tidy bit of forensic accounting that tells you the income channel is doing real work here. Meanwhile the yen is obviously very weak, and the usual suspect, outbound bond buying, is not really the culprit. Japan's net purchases of foreign bonds came in at only roughly $50 billion over the four quarters to Q1, and haven't been that strong in recent quarters. Pressure on the yen is likely more from falling hedge ratios, meaning Japanese institutions are simply choosing to leave more of their foreign-currency exposure unhedged rather than actively shipping new capital abroad. Here is where the IMF ties itself in knots. The IMF's traditional policy advice to Japan is for fiscal consolidation (and a move toward a structural primary surplus), which doesn't help bring the current account surplus down in the IMF's own model and weakens the yen in a classic model. Telling a country to tighten its budget when you also think its currency is too weak and its external surplus too large is the kind of advice that cancels itself out before it reaches the minister's desk. You end up recommending the disease as the cure.