Gaza Conflict Escalates, Driving Oil Prices Up; AI Factories on Horizon

Escalating Tensions Impact Oil Supply

In the wake of a devastating Gaza hospital explosion on Tuesday, resulting in hundreds of Palestinian fatalities, crude oil futures have seen an increase. Palestinians believe this blast was consequent to an Israeli airstrike, while Israel asserts it was due to a faulty Islamic Jihad rocket launch. The incident has raised concerns about potential disruptions in regional oil supply. Consequently, a Jordan-based summit involving U.S. President Joe Biden and leaders from Egypt and Palestine initially scheduled for today has been cancelled. In spite of this interruption, Biden proceeded to Israel to discuss future strategies with Prime Minister Benjamin Netanyahu and the nation’s war cabinet. The disaster in Gaza along with the ensuing diplomatic fallouts sent “oil prices on an upward trajectory.”. This is evident in the November WTI crude (CL1:COM) front-month contract and December Brent crude (CO1:COM), both recording over 2% increases.

The Emergence of AI Factories

Foxconn (OTCPK:FXCOF), globally renowned as the chief contract electronics manufacturer, together with Nvidia (NVDA) have agreed to collaboratively set up artificial intelligence-centered factories. These facilities are aimed at fostering various applications including autonomous vehicles among others. Nvidia CEO Jensen Huang made this announcement during a Foxconn event held in Taipei stating that these AI factories essentially large-scale data centers will be used for training self-driving cars besides powering language-driven generative AI platforms and robotics. Foxconn also known as Hon Hai Precision (OTCPK:HNHAF), plans on incorporating Nvidia’s cutting-edge chips such as the currently China-banned GH200 superchip in the making of these data centers. This news came on the heels of the recently imposed U.S chipset export restrictions.

Auto Industry Delays

General Motors (GM) has revealed their decision to postpone the establishment of its second electric truck plant in Michigan for a year. This delay is a calculated move by GM to “better manage” capital investments given the erratic demand for electric vehicles. Moreover, GM has uncovered engineering enhancements that are set to improve product profitability as disclosed in a company statement. Some industry experts predict that Rivian Automotive (RIVN) might capitalize on other automaker’s struggle in the electric truck arena. The ongoing Detroit strike will likely further impede electric truck production timelines for both GM and Ford (F). In contrast, Tesla’s (TSLA) Cybertruck launch event is yet to be scheduled.