Is a Global Energy Crisis Next?

Why this conflict hits closer than you think

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Good Evening! 👋

Welcome to Sunday’s Bean Breakdown. We have lots to talk about today!

HEADLINES
What You Need To Know

Mark Zuckerberg is growing impatient with Meta’s place in the AI race and is reportedly finalizing a deal to invest $14 billion in Scale AI to bring its CEO, Alexandr Wang, into the fold. Rather than acquiring the startup outright, Meta plans to take a 49 percent stake to avoid further heat from regulators. Wang would lead a new AI research lab at Meta alongside members of his current team. Meta is frustrated by lukewarm responses to its Llama 4 models and is now betting on Wang’s leadership to reboot its GenAI efforts. Zuckerberg has already reshuffled the AI team internally and is said to admire Wang’s “wartime” mentality, viewing him as a crucial player in the U.S. tech sector’s competition with China. Scale AI, one of Meta’s biggest vendors, has a deep portfolio of partnerships with OpenAI, Google, and Microsoft, and has recently moved into defense work as well. For Meta, this is about more than just chips and code. It’s about bringing in the best minds to catch up in the most important tech race of the decade.

AMD just launched its biggest challenge to Nvidia yet. CEO Lisa Su unveiled the MI400 chip on Thursday in San Jose. It powers an entire server rack called Helios, which connects thousands of chips into one massive AI system. OpenAI CEO Sam Altman appeared on stage and said his company will use the chips. The pitch? AMD’s system uses less power, costs less, and delivers more AI output per dollar. Meta, Microsoft, and Oracle are already on board. Oracle plans to deploy over 130,000 AMD chips in its cloud. It’s a direct shot at Nvidia’s dominance. AMD says its current MI355X chip beats Nvidia’s on inference, and the MI400 will go even further. Su says AMD is moving to a yearly release cycle to keep pace. Nvidia still controls over 90% of the market, but AMD is making its move. The chip war is heating up.

Chime just made its Wall Street debut. The online banking company priced its IPO at $27 per share, above expectations, raising around $700 million and landing a valuation of $11.6 billion. Another $165 million worth of shares were sold by early investors. Shares opened Thursday under the ticker CHYM and are already trading near $35, bumping the market cap above $11.5 billion. This marks a major test for fintech in the public markets, especially after a long IPO drought. Chime’s core business, which includes no-fee banking, debit cards, and early direct deposit, pulled in $518.7 million last quarter, up 32 percent from a year ago. Net income came in at $12.9 million. It is a drop from its peak $25 billion private valuation in 2021, but investor demand is clearly heating up.

Apple's big developer event didn’t come with a flashy new product this year, but it did mark a major visual shift. The company is rolling out its first major iPhone design overhaul since 2013, with a new look called Liquid Glass. Think sliding pill buttons, glass-like lock screens, and more fluid animations across devices. It’s all part of iOS 26, which drops this fall. But the reaction was muted. Apple stock fell as Wall Street questioned its AI progress. The company did add more ChatGPT features and showed off an AI-powered phone translator. Still, investors wanted a bigger leap, especially after the lukewarm launch of Apple Intelligence.

Oracle just posted strong results and gave Wall Street even more reason to get bullish. The company beat on both revenue and earnings, reporting $1.70 per share on $15.9 billion in revenue. Shares jumped 8% after hours. CEO Safra Catz said cloud infrastructure growth will accelerate past 70% next year. That’s up from 52% this quarter. Oracle is projecting over $67 billion in revenue for 2026 and thinks it’ll surpass its $104 billion target for 2029. Big names are jumping on board. Temu is moving to Oracle Cloud. Oracle is also working with IBM, SoftBank, and OpenAI. One client just requested every bit of cloud capacity Oracle had. Capital spending more than tripled from last year and will go even higher to meet demand. Ellison said he’s never seen anything like it.

OPINION
Matt Allen’s Take

Source: Bloomberg

On Thursday, Israel launched a direct strike on Iran. Since then, tensions have escalated, and oil has continued rising. But the real fear now is what happens next. If this conflict spreads and the Strait of Hormuz becomes a target, the economic fallout won’t be contained to the Middle East. It will hit your wallet right here at home.

The Strait of Hormuz is one of the most important energy chokepoints in the world. Roughly 20 to 30 percent of global oil passes through it every day, along with one-fifth of the world’s liquefied natural gas. If that flow gets blocked, even temporarily, prices across the board could jump.

That means gas could move to four or five dollars a gallon again. But it’s not just about filling your tank. Higher oil and gas prices show up everywhere. They raise the cost of shipping, manufacturing, packaging, and delivery. That means higher prices on groceries, plane tickets, utility bills, and nearly everything else.

Think about it. If it costs more to move goods across the country, companies are going to raise prices to protect their margins. The result is the same kind of inflation we all just spent the last two years trying to escape.

We have seen versions of this before. In 1973, the Arab oil embargo triggered a fuel crisis. Oil prices quadrupled. Inflation jumped to double digits. The stock market fell nearly 20 percent. In 1979, during the Iranian Revolution, oil doubled again and inflation spiked. Both times, Americans felt the impact in daily life. Long lines at gas stations. Empty store shelves. A hit to the economy that took years to unwind.

This time around, the energy risk is even larger. A full closure of the Strait could remove up to 21 million barrels of oil per day from the global market. That is more than four times the shock we experienced in the 1970s. And since natural gas also runs through the Strait, it could hit electricity and heating costs, too. Especially for families in the Midwest and Northeast who rely on gas in the winter.

This is the kind of environment where headlines can move prices quickly, and where understanding what’s behind the numbers matters more than ever. Not every stock reacts the same way to rising oil.

Two names I am watching closely are Vital Energy and Occidental Petroleum. These companies are built around oil production. Both operate in the Permian Basin and sell crude priced off WTI. When WTI goes up, their revenue goes up. That’s the kind of direct link that can create opportunity when energy prices spike.

Vital Energy is a small-cap name, around 1.5 billion in market cap. It produces about 100,000 barrels per day and gets the majority of its revenue from crude. On days when oil jumps, it often moves more than the commodity itself. When WTI rose over 7 percent on June 13, VTLE popped 8 percent. That’s not a coincidence. It is one of the most leveraged plays on WTI.

Occidental is much larger, around 50 billion in market cap, but still deeply tied to WTI. Around 80 percent of its revenue comes from oil. It is a little more stable than Vital, but still moved 4 percent the same day oil surged. That is a solid move for a company of its size. Both companies benefit directly from higher crude prices, and neither is weighed down by big refining or chemical businesses like Exxon or Chevron.

When tensions flare in the Middle East, it does not stay there. It shows up in your grocery bill. Your heating costs. Your electric bill. Your next flight. We are all connected to these energy flows, whether we realize it or not.

But this is also where I want to be real with you. No matter what is happening, the answer is not to panic. It is to stay disciplined. I believe in dollar cost averaging. I believe in long-term investing. And I believe that reacting emotionally to headlines is one of the fastest ways to lose money.

UPCOMING
What You Need To Watch

On Monday, I’ll be watching how markets digest the Israel-Iran escalation. Oil surged 7 to 14 percent last week, with Brent closing at $74.38 and WTI at $73.12. That move doesn’t just impact energy stocks. It feeds into inflation expectations and could complicate the Fed’s rate path. I’m watching capital flows into gold, Treasuries, and defense names, along with the VIX, which spiked 19 percent on Friday.

On Monday, OPEC releases its monthly report. I’m not expecting surprises, but I’ll be focused on their tone around global demand and supply risks. OPEC+ just announced plans to increase output.

On Tuesday, May retail sales drop. With inflation easing to 2.4 percent year over year, this is a big test for the consumer. A strong print would signal resilience and reduce pressure on the Fed to cut. A miss, especially in the control group, could reinforce soft landing hopes and shift bond yields.

On Wednesday, the Fed announces its interest rate decision. No change is expected, but the updated dot plot and Powell’s tone are what matter.

On Thursday, U.S. markets are closed for Juneteenth. With a packed front half of the week, this pause gives markets room to digest the Fed, oil volatility, and consumer data before Friday resets the tone.

TIP
Why I Focus on Consistent Return on Equity

One metric I always keep an eye on is return on equity, or ROE. It tells me how efficiently a company is using its shareholders’ money to generate profits. For intermediate investors, this is a key signal of quality. A business with consistent ROE above 15 percent over several years usually has a strong moat, solid management, and a clear competitive edge. It shows they are not just growing revenue, but doing it profitably. I am not looking for one good year. I want to see a pattern. Sustainable ROE tells me the company knows how to turn capital into real long-term value.

CHART
FUTURE INDUSTRIES

Source: @bean_wealth

TERM
Capital Efficiency

Capital efficiency tells me how well a company uses the money it raises, whether from profits, investors, or debt, to grow the business. I’m always looking for companies that can do more with less. For example, imagine two SaaS companies each generate $100 million in revenue. One raised $500 million in venture capital, the other raised just $50 million. If their growth is similar, the second company is far more capital efficient. A good rule of thumb is to look at metrics like return on invested capital (ROIC) or revenue per dollar of capital raised. The more efficient the business, the better the long-term upside.

See you on Wednesday!

Cheers,

Matt Allen

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