Markets Brief: Will the Consumer Start Crying ‘Uncle’?

With US stocks hovering near fresh record highs, attention has been on the massive rally in AI infrastructure stocks. That mega-sized trend will be front and center this coming week with the IPO of AI-focused chip designer Cerebras. Reports over the weekend suggest demand for the IPO is red hot. Cerebras stock is slated to price Wednesday and began trading on Thursday.

In this week’s Markets Brief, we check on what companies are saying about consumers in first quarter earnings calls. As we wrote last week, the US economy is already being driven by the AI boom. But the health of consumer spending still matters. We also take a look at the emerging-market stock rally that is leaving US stocks in the dust, the narrowing world of unicorn funding, and a peek at the red-hot inflation reading expected this week.

Retail Earnings and the Consumer

Unless you are an AI researcher weighing competing seven-figure salary offers or a real estate agent pulling in hefty commissions for selling family farms to data center operators, affordability is a major issue for many US consumers. With gas prices up more than 50% since the start of the Iran war, the day-to-day cost of living has become even more of an issue for lower- and middle-income families. In addition, the reduction in SNAP benefits is adding to the pressure on lower-income households.

Thus far, the first-quarter earnings picture has helped lift the stock market to fresh highs, largely on tech companies reporting booming business, thanks to the AI infrastructure buildout. Over the next two weeks, quarterly earnings reports will start to include big-name retailers. Among the major consumer-facing companies that have reported so far, the picture is of a K-shaped economy that is not only intact but potentially intensifying.

Higher-income households continue “to have very resilient spending,” said McDonald’s MCD chief executive Chris Kempczinski. “When you have elevated gas prices … that is going to disproportionately impact low-income consumers, and so we expect the pressures there are going to continue.” At Kraft Heinz KHC, chief executive officer Steve Cahillane said the consumer ”is under a tremendous amount of pressure.”

Easily the starkest view so far came from Whirlpool CEO Marc Bitzer: “Consumer sentiment was already on a very low level by any historical standards, but the war in Iran amplified consumer concerns about the cost of living.” According to Bitzer, demand in the US appliance industry declined 7.4% in the first quarter, with March down 10.0%. “This level of industry decline is similar to what we have observed during the global financial crisis and even higher than during other recessionary periods,” he said. Whirlpool stock has lost nearly 20% since reporting earnings on Thursday.

The AI Infrastructure-Powered Emerging-Market Rally

It’s not just the US stock market that is getting a lift from the AI infrastructure buildout. The frenzy has catapulted emerging-market benchmarks well ahead of the US stock market, despite the threat the energy shock poses to key economies, most notably South Korea. Over the past year, the Morningstar Emerging Markets Index is up 51.5%, well ahead of the 31.6% gain in the Morningstar US Market Index.

Powering the emerging-market rally have been semiconductor and hardware stocks. Semis are 14% of the index and are responsible for 21.5 percentage points (42%) of the past year’s gain. Within that group, Taiwan Semiconductor Manufacturing Company TSM (up 143% over the last 12 months) has contributed more than 10 percentage points of returns. Korea’s SK Hynix 000660, another semiconductor stock, is up more than 700% over the past year and has contributed more than 7 percentage points. Samsung 005930, which falls into the consumer electronics industry but is benefiting from its AI-related memory business, is up more than 380% and provided 7.4 percentage points of return. Morningstar analysts see the US-traded shares of TSMC as fairly priced, but both SK Hynix and Samsung are deemed as overvalued.

The Unicorns Among Unicorns

It’s not just the public stock market that is concentrated these days. The private market is also seeing just a handful of companies hoovering up a tremendous share of investor dollars.

PitchBook analysts Harrison Rolfes and Franco Granda write that during the first quarter, there was a record amount of fundraising by so-called “unicorns,” which are venture-capital-backed companies valued at more than $1 billion. During the first three months of the year, $245.6 billion was raised across 227 transactions. However, “it was a quarter that belonged to five companies,” they write in their latest Unicorn Tracker report.

To some degree, it was really a story of four of those companies, with OpenAI, Anthropic, xAI, and Waymo responsible for 76.8% of the money raised in the quarter, according to PitchBook’s data. Rolfes and Granda say that while on the surface, this is a sign of strength, “The concentration also introduces a new kind of fragility.”

Here’s more of what they had to say:

“Any single deal slipping or repricing can swing the entire market narrative from “record-breaking” to “disappointing” overnight. This wasn’t the case in 2021, when activity was broad-based. It’s the defining feature of 2026. SpaceX’s acquisition of xAI for $250 billion accounted for 72.8% of the quarter’s $343.1 billion in exit value.

That’s not all. More than half of the 1,680 active unicorns haven’t raised a round in over two years. Their valuations, many set during the 2020-21 boom, sit in the $8.6 trillion aggregate at face value, never tested by a new transaction. Until those companies either raise new valuations or exit, the market is carrying a significant pool of unpriced risk. Any broad repricing event would hit those stale valuations first.

CPI to Serve Up Hot Inflation Reading

In addition to earnings, the other focus this week will be the April inflation report due to be released Tuesday morning. Given the surge in gas prices, overall CPI is going to come in hot. Economists forecast CPI inflation running at a 3.9% annual rate for April, the highest since the spring of 2023. The bigger question will be the degree to which the energy spike and supply chain snarls start to feed through to other parts of the economy, but that won’t be known for months.