Markets shone brightly to kick off August with a broad rally and the best start to a month in years. But perfect summer days are rare and these idyllic conditions are unlikely to last for long.

The S&P 500 gained 1.5%, marking its best first day of a month since October 2022, leaving it within touching distance of a record. The Dow Jones Industrial Average closed at a record high as heavyweight constituent Amazon closed above a $3 trillion market capitalization for the first time. It’s a member of the so-called Magnificent Seven megacap technology stocks, which have added $1.77 trillion in market value in just three days. 

Importantly, it wasn’t just tech, or semiconductors, or a narrow part of the market feeling the cheer. Falling oil prices, strong growth data, and lower bond yields were driving gains across most sectors, with only energy as a notable laggard. There’s plenty to be optimistic about in this stellar earnings season, with S&P 500 companies headed for their strongest average earnings growth since 2021 even as valuations remain relatively inexpensive. 

But there remain some factors that could bring dark clouds, including earnings from SpaceX later in the day and volatile memory stock Sandisk Wednesday. The most immediate is continuing uncertainty over resumption of shipping through the Strait of Hormuz, after Iran denied talks were under way with the U.S. While Middle East tensions keep oil prices high, it’s hard for the market to entirely discount inflation concerns and the potential need for the Federal Reserve to raise interest rates. 

Until the U.S.-Iran deal is finalized, it’s worth bracing for a storm in markets, even during the historically quiet days of August.

—Adam Clark

Get more of the journalism you love. Choose Barron’s as a preferred source in Google.

Palantir Technologies has long been known for its work for the federal government, but it is getting the most traction lately from U.S. commercial sales, a much larger potential market whose recent demand it calls “otherworldly.” Second-quarter numbers surpassed expectations, and it raised its outlook.

• Palantir takes all the disparate data an enterprise creates and combines them into a structured “data lake.” On top of that it builds custom applications to tackle specific data issues, and to use AI to draw connections and surface hidden relationships, which is appealing to medium-size and larger U.S. businesses.

• Sales to U.S. commercial customers were up 149% in the second quarter. Palantir’s government revenue was still larger, and rose 90% from a year ago, but the gap is closing. While sales in the U.S. more than doubled this quarter, international revenue rose by just 33%. 

• In a shareholder letter, CEO Alex Karp reiterated his opposition to AI model labs like OpenAI and Anthropic. He criticizes them for having grown and thrived on written works and now claims the models “now have their sights set on global industry.” OpenAI and Anthropic didn’t respond to requests for comment.

• Palantir software supports a wide range of AI models, including ones from OpenAI and Anthropic. For the quarter, it reported adjusted earnings of 41 cents a share and revenue of $1.9 billion, which was up 93% on the year, continuing the company’s trend of accelerating growth.

What’s Next: Guidance for the current quarter exceeded expectations, with revenue seen in a range of $2.16 billion to $2.164 billion, and the company raised its 2026 annual outlook, seeing revenue of $8.15 billion to $8.158 billion.

—Adam Levine and Liz Moyer

Today the White House is hosting a discussion with the AI industry about a federal blueprint for evaluating national security risks from AI models before they are released to the public. Anthropic, creator of the large-language chatbot model Claude, will be among the attendees.

• The administration in June set a 60-day deadline to draft the blueprint. A person familiar with the matter confirmed to Barron’s that Anthropic will attend. The Information, citing people familiar with the matter, said OpenAI and Alphabet had also been invited.

• National Cyber Director Sean Cairncross, the president’s principal advisor on cybersecurity policy, will host the gathering, the Information’s report said. The White House is looking at how to assess the advanced cyber capabilities of AI models and designate what makes a model a cyber risk. 

• The president’s June 2 order also established a voluntary process that would give the federal government early access to AI models to promote secure innovation and strengthen the cybersecurity of critical infrastructure. 

• Cyber threats posed by AI models came to the forefront after Anthropic found that Mythos, its most capable AI model, has strong hacking capabilities. Anthropic has limited the release of Mythos.

What’s Next: The meeting also comes amid growing competition from Chinese AI models. Token usage of Chinese models was 70% higher than for U.S. models in June, says Apollo Chief Economist Torsten Sløk. Though China’s access to advanced chips is restricted, U.S. frontier models are just a couple months ahead.

—Angela Palumbo, Reshma Kapadia, and Janet H. Cho

Snap is gathering optimism ahead of the fall release of its augmented reality glasses. Both user count and revenue for the most recent quarter beat expectations and advertising sales rose from a year earlier. The social-media platform is leaning heavily into wearables, with Specs in preorders for $2,195. 

• Its adjusted second-quarter loss of 10 cents a share was narrower than expected, and revenue rose nearly 19% to $1.6 billion. Ad sales rose 9% to $1.28 billion. Daily active users were 493 million, up 5%, though that is a slowdown from the year-ago’s 9% rate.

• Monthly active users for the quarter of 971 million beat estimates of 960.6 million and grew 4% from the prior year. That increase was also a slowdown from the prior-year period’s 7% growth. 

• Investors have been closely monitoring Snap’s user growth as multiple countries across the globe have introduced laws banning teens from using social-media platforms, including Australia and France. In June, the U.K. said it was seeking to bar those under 16 from using social media.

• CEO Evan Spiegel said their objective was to turn the company’s scale into durable growth and stronger cash generation “while demonstrating the long-term value of our investment in Specs.” It is also using AI to deepen user engagement.

What’s Next: Snap sees third-quarter revenue in a range of $1.70 billion to $1.74 billion, which is above expectations, and adjusted earnings before interest, taxes, depreciation, and amortization of $300 million to $350 million.

—Angela Palumbo and Liz Moyer

Visa’s plans to buy BioCatch, an antifraud intelligence provider that analyzes data points and patterns in human activity, is the latest development in the ongoing fight against AI-enabled digital scams targeting financial transactions. BioCatch says it can “distinguish the criminal from the legitimate.” 

• The payments giant is acquiring BioCatch for $2.4 billion in cash to complement its current security efforts and help users better protect themselves and their customers from the growing threat of account takeovers, scams, money mules, and application fraud.

• Evercore ISI analysts led by Adam Frisch called BioCatch a significant addition to Visa’s “already formidable” security solutions portfolio and said it would help Visa close a perceived gap with Mastercard in a critical area requiring better fraud-detection solutions.

• BioCatch monitors keystroke activity and AI agent usage to ensure the safety of bank transactions, the analysts wrote. It also addresses emerging digital identity challenges by focusing on online user behavior to more effectively fight fraud.

• Sachin Mehra, Mastercard’s chief business officer, told Barron’s last week that Mastercard’s technology strategy now spans cybersecurity and digital assets. It said things like generative AI are also available to the bad guys and require greater investment in security to protect transactions.

What’s Next: Evercore ISI said it expects greater investments in capital and resources related to fraud, security, and identity to protect payments in the AI age. Subject to regulatory approval and other closing conditions, Visa said it expects the BioCatch deal to close by the second quarter of fiscal 2027.

—Janet H. Cho

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Callum Keown