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Google parent Alphabet on Monday announced plans to sell stock to fund AI investments.
Credit: VCG / VCG via Getty Images

Key Takeaways

• Alphabet this week began selling stock to raise money for its AI investments, a move that some experts say signals the data center buildout is entering a new, riskier phase.
• AI data center spending has been a boon to the economy and stock market, fueling gains for the stocks of data center suppliers like chip designers and networking suppliers.

Investors are eager for clues that the blockbuster AI spending that has powered markets higher in recent months is slowing. They may not like everything they see.

One example: This week's move by one of the world's most profitable companies to raise money by selling stock. Alphabet (GOOG) on Monday announced a plan to sell $80 billion of stock to fund its AI infrastructure investments and meet “unprecedented customer demand” for computing power. The first $40 billion phase of the offering was “well over-subscribed,” according to CEO Sundar Pichai, allowing Alphabet to sell nearly $5 billion more than planned this week.

About $30 billion of the capital raised is earmarked for taxes, but the remainder will go toward building, equipping, and powering Alphabet's AI data centers. The company expects to invest between $180 billion and $190 billion in that infrastructure in 2026, and forecasts expenditures will “significantly increase” next year. Alphabet and its hyperscaler peers—Microsoft (MSFT), Amazon (AMZN), Meta (META), and Oracle (ORCL)—are on track to spend more than $700 billion on capital expenditures this year. 

Why This Is Important

Big tech's AI-related capex has repeatedly sparked debate about an AI bubble. In the past, bulls argued bubble fears were overblown in part because hyperscalers were flush with cash to pay for investments. Alphabet's stock sale underscores the mounting financial pressures tech companies face as they ramp up spending.

“Equity funding suggests the AI capex cycle is entering an increasingly mature and capital-intensive phase, where even cash-rich hyperscalers are increasingly tapping external capital,” analysts at BCA Research wrote Tuesday.

Hyperscalers largely paid for the AI buildout from 2023 to last year with cash from their hugely profitable businesses. The five companies reported aggregate earnings of about $400 billion last year. But their AI investments have grown even faster than their profits, forcing them to find additional sources of cash. Oracle has sold nearly $50 billion of bonds since September, and Meta in October raised $30 billion in debt. 

Alphabet is the first of the hyperscalers to sell stock to fund its AI ambitions, a development that's given some on Wall Street pause. That the company "chose equity vs. credit suggests the market has become less favorable to AI [data center] financing,” wrote Oppenheimer analysts on Monday. They argue that doesn't bode well for “weaker positioned companies” like Meta, which is spending aggressively on AI tools for internal use, unlike the other hyperscalers investing in computing capacity to be rented out. 

If Alphabet's pivot to the equity market does signal lenders' reluctance to finance more data centers, it could be a watershed moment of sorts, says Oppenheimer. “We think this could be the first catalyst to more rational spending,” the analysts wrote. 

A slowdown in AI spending could be disastrous for the AI infrastructure stocks that have carried the stock market to record highs in recent months. Shares of Broadcom (AVGO) plummeted on Thursday after the custom chip designer reiterated its AI chip revenue forecast, disappointing investors hoping for a more bullish outlook. Other high-flying AI infrastructure stocks, like Micron (MU), Corning (GLW), and Advanced Micro Devices (AMD), were also sharply lower. 

The risk that investors sour on AI spending as the buildout enters a leveraged phase is one reason BCA analysts recommend investors “rotate from AI infrastructure beneficiaries toward the AI adoption and monetization layer” that doesn't depend on ever-increasing data center spending.

Plenty of experts don't see anything ominous in Alphabet's stock sale. “Google went where the capital was cheapest, and I don't blame the company,” said Nancy Tengler, CEO & CIO of Laffer Tengler Investments. “If you're capital consumptive and it's available, take the capital,” Goldman Sachs CEO David Solomon told CNBC on Wednesday. (Goldman was one of three book runners on the stock offering.)

But others say Alphabet's stock sale could open the floodgates for similar deals. “So as not to be put at a competitive disadvantage, we cannot rule out further capital raises from other hyperscalers” looking to cash in on high stock prices and strong demand for AI exposure, wrote HSBC analysts on Tuesday.

UnitedHealth shares have rallied 20% since the start of the year.
Credit: Ben Brewer / Bloomberg / Getty Images

Key Takeaways

• UnitedHealth Group shares surged to lead the Dow higher Thursday after the insurance giant's stock was upgraded by Bank of America.
• The analysts said they see high medical costs that have pressured UnitedHealth's margins in recent quarters look to be improving ahead of its second-quarter results.

UnitedHealth Group's stock is rallying Thursday, leading the Dow Jones Industrial Average higher on a mixed day for the major indexes after a fresh vote of confidence on Wall Street.

UnitedHealth (UNH) shares were up over 5% in recent trading to $396 after Bank of America analysts upgraded their rating of the insurer to a "buy," and lifted their price target to $450 from $420, citing expectations of improving margins as a result of more favorable medical cost trends.

The analysts said "incoming data points make it more difficult to believe that the strong Q1 was purely a function of weak flu and storms,” which could mean more upside ahead for the insurer.

Why This Matters to Investors

The upgrade from Bank of America could help improve sentiment around UnitedHealth's stock and extend its recent rally.

While higher-than-expected medical costs have weighed on UnitedHealth's results in recent quarters, the analysts said recent data points suggest improvement in cost trends, along with insurance usage, which could leave a more "favorable" setup for UnitedHealth's second-quarter results.

The stock has rallied in recent weeks following a solid first-quarter earnings report, recovering from a slump earlier in the year. Elevated medical costs, investigations into UnitedHealth's billing practices, and a sudden CEO change pressured the stock for much of last year, dragging it to multi-year lows.

With Thursday's gains, UnitedHealth shares are up about 20% since the start of the year, and more than 50% from its lows in late March.

Even with Thursday's slump, Broadcom shares are still up around 20% since the start of the year.
Credit: Mike Campbell / NurPhoto / Getty Images

Key Takeaways

• Broadcom shares fell Thursday despite a better-than-expected earnings report, leading several chip stocks lower.
• Analysts said investors may be disappointed Broadcom didn't lift its 2027 forecast of at least $100 billion in AI chip sales.

Broadcom's latest quarterly results and forecasts topped Wall Street's estimates. So why is the stock slumping, and leading other chip stocks lower?

Broadcom (AVGO) shares were down nearly 15% in recent trading, leading decliners on the Nasdaq, despite solid earnings. Several other chip stocks, including Marvell Technology (MRVL) Advanced Micro Devices (AMD), Nvidia (NVDA), Intel (INTC), and Arm Holdings (ARM), also lost ground, weighing on the major indexes.

Some analysts suggested some investors may have been disappointed that Broadcom didn't raise its long-term outlook, given a string of strong results from other semiconductor firms. The chipmaker forecast third-quarter revenue of $29.4 billion, ahead of estimates, but kept its long-term forecasts steady.

Why This Matters to Investors

The pullback in Broadcom's stock following better-than-expected results could speak to how closely earnings from big names in the AI trade are being watched following the recent tech rally.

William Blair analysts said investors may have been looking for Broadcom to provide a new target beyond its previous forecast of over $100 billion in AI chip sales next year. Still, the analysts said they remain confident "that Broadcom can maintain its robust growth trajectory."

Broadcom reported adjusted earnings per share of $2.44 on a 49% year-over-year jump in revenue to $22.19 billion for its fiscal second quarter. Both figures topped consensus projections compiled by Visible Alpha.

William Blair also suggested some investors could be concerned about worsening margins as Broadcom relies more on selling custom chips. Broadcom's gross margins, which came in ahead of estimates at 77% for the second quarter, are expected to decline to about 74% in the current quarter, as Broadcom's business shifts further towards custom chips that compress margins.

Even with Thursday's slump, however, Broadcom shares are still up about 18% since the start of the year. They closed at a record high Tuesday, ahead of the company's results.

Michael Dell, right, with Nvidia CEO Jensen Huang. Dell counts Nvidia as a key partner.
Credit: Ian Maule / Bloomberg / Getty Images

Key Takeaways

• Michael Dell's $233 billion makes him the world's sixth-richest person.
• He owns about 40% of Dell Technologies and has seen his wealth surge as the stock rallied recently.

Dell's recent rally has CEO Michael Dell climbing the ranks of the world's richest people—and ahead of some big names.

Shares of Dell (DELL) have added nearly a third of their value since the AI server maker posted better-than-expected earnings late last week. That has lifted Michael Dell's net worth by $37 billion to $233 billion through Wednesday's close, making him the world's sixth-richest person, according to the Bloomberg Billionaires Index. The gain helped him overtake Meta Platforms' (META) Mark Zuckerberg, and he currently sits above Nvidia's Jensen Huang (NVDA)—while looking up at Amazon.com's (AMZN) Jeff Bezos.

Much of Michael Dell's estimated wealth is tied to his roughly 40% stake in the tech company, so his wealth closely tracks the stock, which has more than tripled in value this year as sales of its AI servers surged. Dell has also benefitted from a high-profile show of support from the Trump administration. The CEO announced billions of dollars in donations late last year to support Trump Accounts for children.

Dell reportedly owns a sizable stake in custom AI chipmaker Broadcom (AVGO), which he acquired after VMware, which was spun off from Dell in 2021, was sold to Broadcom for $69 billion in 2023. Broadcom, which has rallied to record highs recently along with Dell, was up close to 40% year-to-date through Wednesday.

Dell last week reported quarterly adjusted earnings per share of $4.86 that more than tripled from a year earlier, on revenue that nearly doubled to a record $43.8 billion, as AI-optimized server orders rocketed 757% to $16.1 billion.

Recent gains in AI-linked stocks have shifted the top of the billionaire leaderboard. Surging shares of Oracle (ORCL) have Larry Ellison now third on the Bloomberg list, ahead of Bezos and Google co-founder Sergey Brin.

News of the day for June 4, 2026

The major stock indexes pulled back Wednesday from record highs set earlier in the week.
Credit: Liu Yanan / Xinhua via Getty Images

Stocks are largely moving lower ahead of the opening bell Thursday as chip stocks pull back from recent highs, while oil prices fall are falling amid fresh developments in the Middle East; Broadcom shares are dropping despite positive results and guidance from the chipmaker; SpaceX yesterday revealed an IPO target price of $135 per share, which would raise about $75 billion and value the company around $1.75 trillion; CrowdStrike shares are slipping after the company beat estimates, following a record rally for the cybersecurity firm ahead of the report; Bitcoin is extending a recent slump to the lowest point since February, pulling other crypto stocks down with it.

Here's what you need to know today.

Stocks Mixed After S&P Broke 9-Day Win Streak Yesterday

Stock futures are mixed this morning as investors react to earnings reports in the tech sector. Dow Jones Industrial Average futures are up 0.5%, while futures for the S&P 500 and tech-heavy Nasdaq are down 0.5% and 1.2%, respectively. The major indexes all fell yesterday, pulling back from the record levels reached earlier in the week and ending a nine-day winning streak for the S&P 500.

Crude oil futures are down more than 1%, trading around $95 a barrel this morning. The House of Representatives passed a war powers resolution to check President Donald Trump's authority over the conflict, and Israel and Lebanon agreed to renew a ceasefire as fighting between the two has been a factor holding up U.S. and Iran talks. Bitcoin is extending its slide to below $63,000, its lowest point since February. Gold futures are up slightly at $4,500 an ounce, while the 10-year Treasury yield is pulling back to 4.47% from yesterday's close of 4.50%.

Broadcom Stock Tumbles Despite Solid Earnings

Broadcom (AVGO) shares are tumbling after the chipmaker posted its latest quarterly results after the bell last night. Broadcom said it earned an adjusted $2.44 per share on $22.19 billion in revenue for its fiscal second quarter. Both numbers were above the Visible Alpha consensus of $2.39 per share and $22.06 billion, but the company's results and outlook may not have matched the hopes of some investors and analysts after the stock had rallied alongside other tech shares into record territory ahead of the report. Broadcom shares are down 15% ahead of the opening bell. Other chip stocks are also moving lower, including Marvell Technology (MRVL) and Advanced Micro Devices (AMD), which are down 6% and 4%, respectively. AI heavyweight Nvidia (NVDA) is 1% lower.

SpaceX Targets IPO Price at $135 Per Share to Raise $75 Billion, With a $1.75T Valuation

Investors got more details on one of the year's most anticipated initial public offerings, as SpaceX revealed its current targets for its IPO in a regulatory filing yesterday. The Elon Musk-led space exploration, social media, and AI company said it expects to offer 555.56 million shares at a price of $135 per share. That would put the IPO's proceeds at $75 billion, the most ever, and value SpaceX around $1.75 trillion, making it one of the most valuable companies on the market today. Some reports have suggested SpaceX could debut next week using the ticker "SPCX," which would give investors a bit more time to dive into the company's finances ahead of the debut.

CrowdStrike Stock Sinks After Results, Announces Stock Split

CrowdStrike (CRWD) shares are losing ground this morning despite a solid first-quarter report. The cybersecurity firm on Wednesday reported $1.39 billion in revenue along with adjusted earnings per share of $1.10, just topping what analysts had expected. CrowdStrike shares had rallied to record highs ahead of the report, meaning a moderate earnings beat may not have been enough to impress investors. Sentiment around cybersecurity has improved as analysts have said AI developments will likely lead to more cybersecurity spending rather than AI tools replacing the industry. CrowdStrike also announced a four-for-one stock split Wednesday, which will take place early next month. Shares were down 10% premarket.

Bitcoin Hits Lowest Point Since February, Dragging Crypto Stocks Down With It

Bitcoin's recent rough patch is continuing, with the cryptocurrency recently trading around $62,500, up from overnight lows of $61,300 but still its lowest point since February. The latest slump, which puts bitcoin down nearly 30% since the start of the year, is weighing on the larger crypto industry. Several stocks with crypto ties are also down this morning, including exchanges like Robinhood (HOOD) and Coinbase (COIN), down roughly 2% and 1%, respectively. Strategy (MSTR), the largest corporate owner of Bitcoin, is down 2%.

Federal Reserve officials are caught between inflation and the labor market.
Credit: Andrew Harnik / Getty Images

Key Takeaways

• The Fed's "Beige Book" anecdotal report gave a snapshot of an economy grappling with the effects of rising fuel prices from the Iran war.
• Businesses are passing higher transportation costs along to customers, with lower- and middle-class consumers struggling to pay the added costs.
• The report could amplify concerns about inflation, which the Fed is charged with keeping under control.

All over the country, people are giving the Federal Reserve an earful about the rising cost of pretty much everything.

That's according to the Fed's "Beige Book" report released Wednesday, which was filled with complaints from the Fed's business contacts about higher fuel costs due to the Iran war and the ripple effects it's creating throughout the economy.

The report, a compilation of anecdotal information from around the country, raised red flags about the trajectory of inflation as the conflict in the Middle East keeps fuel prices elevated. Fed officials have expressed increasing concern in recent months about the war's impact on prices and warned they may have to raise the central bank's benchmark interest rate to quash inflation.

If any Fed officials are looking for evidence of gathering inflation storm clouds, they could find it in Wednesday's Beige Book, which emphasized that higher transportation costs from higher fuel prices are being passed through to other products, and that businesses that don't do so are taking a hit to their profits.

A fuel distributor in the Richmond Fed's district told Fed researchers their price had increased 125% in the past month.

"Everything gets to the consumer with diesel" and that had in turn pushed up the price of goods, the distributor said, according to the report.

"One furniture retailer noted that they were receiving fifty percent fuel surcharges on domestic freight along with tariff surcharges, which were extremely hard to pass along via retail prices," the report said.

Another prominent theme of the report was the effect those higher prices are having on lower and middle-income consumers, whose budgets are being strained to fill up their gas tanks.

A businessperson in the Kansas City Fed's district said: "Middle-income households are squeezing more life out of every dollar before deciding to spend it."

The stress doesn't seem to be reaching people with higher incomes, however, who are doing better than ever, according to several parts of the book, including one contact in the Atlanta Fed's district.

"Higher-income consumers drove strong demand for premium goods and services, with one contact describing a focus on 'unapologetic luxury,'" the report said.

Despite the impact of the war, the economy as a whole continued to grow in most places, and the job market remained in its recent low-hiring, low-firing limbo, in which workers and employers are both reluctant to part ways.

Sandisk and Micron are the best-performing stocks in the S&P 500 for 2026 so far
Credit: Justin Sullivan, Bloomberg / Getty Images

Key Takeaways

• Memory stocks have soared this year as growing demand and rising prices drove up profits amid a global shortage, and Morgan Stanley analysts don't see it ending anytime soon.
• The analysts said that the memory shortage driven by AI demand could last another two to three years, which would benefit Micron and Sandisk.

Booming AI demand and rising memory prices could mean even more gains ahead for memory investor favorites Micron and Sandisk, after a blistering rally in recent months, according to analysts at Morgan Stanley.

The analysts, which have "overweight" ratings on both stocks, wrote in a note to clients Wednesday that "there's no quick fix" to the memory shortage driven by AI demand, which they expect could last another two to three years. They lifted their price targets for the stocks, though both have already blown past the targets with their recent gains.

Shares of Sandisk (SNDK), which jumped nearly 7% to a record close above $1,831 Wednesday, quickly surpassed Morgan Stanley's latest target at $1,750. Micron Technology (MU), which climbed 1.5% to a new high above $1,079, has also overtaken the analysts' $1,050 target for the stock. Since the start of the year, Micron shares have nearly quadrupled in value, while Sandisk shares have soared some 670%, making them the best-performing stocks in the S&P 500 for 2026 so far.

Why This Matters to Investors

After a torrid rally for shares of Micron and Sandisk in recent months, some investors may be wondering whether the stocks still have room to rise.

Though Micron and Sandisk are both investing in growing their supply capabilities, Morgan Stanley said it expects demand could continue to outpace supply in the near term, which could support rising prices in the next few quarters.

The analysts also suggested the stocks could potentially get a boost from expected contract negotiations in the back half of this year, and possible share buybacks next year.

"Memory stocks were strong in 2025 and have continued to pace the market again in 2026, but we don’t think the run of strong performance is over," the analysts wrote.

Apple has delayed the launch of an AI-enhanced Siri several times since announcing the feature in the summer of 2024.
Credit: Jason Henry / Bloomberg / Getty Images

Key Takeaways

• Apple stock has been on a hot streak alongside a broader AI and tech rally. Next week's Worldwide Developers Conference could serve as the next catalyst.
• Analysts have said they expect to see AI features including a revamped Siri, which has been delayed several times in the last two years.

Apple's annual Worldwide Developers Conference is scheduled to kick off Monday. The event looks set to follow what has been a strong stretch for the stock.

Shares of Apple (AAPL) have risen about 14% since the start of the year through Wednesday's close, outpacing the S&P 500 and recently rallying into record territory above $315; the shares closed today around $310. Strong earnings reports from Apple and its tech peers have helped drive renewed enthusiasm around AI and the broader tech trade.

Why This Matters to Investors

A number of delays to previously announced AI features, including an upgraded Siri, have weighed on Apple stock in recent years. New details about the AI features and a clear timeline for when they will be released could be a positive catalyst for the stock.

Bank of America analysts lifted their price target to $380 from $330 ahead of the event; both numbers are ahead of the Visible Alpha mean of analysts' targets, which is near $322. The analysts said that as the capabilities of AI agents grow, the company that owns the device and platform where the agents run will become more valuable than the model behind the agents. That, they said, could benefit Apple with its broad penetration of iPhones if it can make Siri a dominant AI agent.

The iPhone maker is expected to unveil a number of new AI features, including an enhanced Siri that investors and customers have been waiting for since Apple first announced it at the WWDC in 2024. JPMorgan analysts said they expect to see a redesigned Siri with new capabilities, along with a potential standalone Siri chatbot app that would compete with ChatGPT and Claude.

"The announcement of a new AI-enhanced Siri, controllable through voice or a new text-based interface, will be the key development in focus by investors, serving as the first evaluation point in understanding whether Apple's new AI features could be a medium-term demand driver for iPhone and/or drive new Services revenue streams," Goldman Sachs analysts wrote Tuesday.

The JPMorgan analysts said they expect the event to "serve as the kickoff point for a more robust launch cadence" ahead of Apple's fall product launch schedule, which could include the first foldable iPhone.

UBS analysts don't expect WWDC will be much of a positive catalyst for Apple shares. The new features may be more convenience focused, they wrote, and fail to drive many new iPhone sales.

The large number of exemptions to the tariffs imposed on imports has complicated the task of complying with them.
Credit: Mario Tama / Getty Images

Key Takeaways

• The new tariffs announced this week come with a 76-page list of exempted items including beef, coffee and aircraft parts.
• The many exemptions to President Donald Trump's tariffs over the last year have limited their impact.

Another week, another set of tariffs, and another set of exceptions to them.

President Donald Trump's administration proposed a fresh set of tariffs Tuesday evening targeting 60 countries, including major trading partners, which it accuses of having inadequate safeguards against using products made with forced labor. The countries will be subject to a tariff of up to 12.5%, going into effect at some point after a hearing scheduled for July 7, the U.S. Trade Representative said.

Those tariffs came with a long list of exemptions: you'll still be able to import "Coral, shells, cuttlebone and similar materials, unworked or simply prepared but not cut to shape; powder and waste thereof" without paying any additional import taxes. Also exempt are coffee, beef, aircraft parts and other items, the list of which runs 76 pages.

Separately, on Monday, the White House said it was cutting tariffs on industrial and agricultural equipment including combines, harvesters, bulldozers and forklifts to 15% from 25%, and down to 10% if they were made with mostly American metal.

What This Means for the Economy

The large number of exemptions to the tariffs imposed starting last year has complicated the task of complying with them, while reducing the overall drag the tariffs exert on the economy.

The announcements continued a pattern that has been repeated since Trump began a far-reaching campaign of imposing tariffs on nearly every U.S. trading partner in 2025: tariffs are put up, but with numerous exemptions that increase as time goes on.

The fact that so many products avoid tariffs has kept the actual rate that Americans pay well below the announced levels, economists say. Overall, Americans are paying an average tariff of 9.3% on imported products despite some announced tariff rates being much higher, Grace Zwemmer, U.S. economist at Oxford Economics, estimated in a commentary Tuesday.

The exemptions have come nearly as fast and furious as the tariffs themselves. For instance, after Trump's "Liberation Day" announcement, in which he set up sweeping import taxes on most countries in the world, he exempted iPhones and other consumer electronics. In April, when the King and Queen of the U.K. visited, Trump celebrated by lifting the tariff on British whiskey. In November, the administration exempted a swathe of food products in an effort to drive down grocery prices.

The latest wave of tariffs is part of an effort to rebuild Trump's regime of import taxes he imposed in 2025 largely using emergency powers. After the Supreme Court struck down those tariffs as illegal, the administration has been setting them back up by different legal mechanisms piece-by-piece while paying out refunds to companies for the invalidated ones.

Meanwhile, every U.S. trading partner is subject to a temporary 10% global tariff Trump imposed immediately after his Supreme Court defeat. That measure expires in July, about when the latest round of tariffs are on track to take effect.

In addition to the tariffs announced Tuesday, which are justified under Section 301 of the Trade Act of 1974, the administration is pursuing additional tariffs on 11 countries for the unfair trade practice of creating "structural excess capacity" in their economies.

Prices at the pump have taken a toll on American pocketbooks.
Credit: David Paul Morris / Bloomberg via Getty Images

Key Takeaways

• U.S. drivers are filling up their tanks a bit less and making more frequent gas station visits, just some of the ways retailers and market data suggest consumers are adjusting to sharply higher gas prices in the wake of the war in Iran.
• According to retail data provider Placer.ai, visits to discretionary retailers declined in April, and even non-discretionary stores have seen visits decline year-over-year in recent weeks.

Don’t call it demand destruction. Instead, let’s say it’s demand moderation. 

Americans facing the highest fuel prices in years are putting less gas in their tanks and making more frequent visits to the pump, according to retailers, mirroring the way Americans have adjusted their food shopping habits to contend with inflation. Drivers feeling the pinch are increasingly seeking out value at wholesale clubs like Costco (COST), Walmart’s (WMT) Sam’s Club, and BJ’s, all of which offer members discounted gas. According to location intelligence firm Placer.ai, visits to BJ’s Gas, Costco Gas, and Sam’s Club Fuel surged in early March as prices began to rise. At all three chains, the share of customers making multiple visits a month rose year-over-year in both March and April.

“In the most recent period, the number of gallons that customers fill up with when they come to our fuel stations fell below 10 for the first time since 2022,” said Walmart CFO John David Rainey on the company’s quarterly earnings call last month. Bob Eddy, CEO of BJ’s Wholesale Club (BJ), told analysts his company had observed “some modest shifts in behavior” among consumers visiting its gas stations, “with average gallons per fill-up slightly lower.”

Why This Is Important

Gas prices have risen sharply this year, pressuring the finances of low-income consumers and driving them to ramp up their search for deals and value. High gas prices are both a potent reminder of rising costs and a driver of consumer inflation, making them a significant headwind to consumer spending.

The national average gas price is up more than 40% since late February, when Iran responded to U.S. and Israeli airstrikes by effectively closing the Strait of Hormuz, a vital trade route through which about a fifth of the world’s seaborne oil passed before the war. The national average price per gallon hit $4.56, a nearly four-year high and just 10% off a record, in early May before moderating slightly in recent weeks. 

Soaring gas prices put the most pressure on lower-income consumers, who usually spend more of their disposable income on gas. “We see with our customers that the high-income customer is spending with confidence into many categories, while the lower income consumer is more budget conscious and perhaps navigating financial distress,” said Walmart’s Rainey. 

The search for value is making wholesale clubs go-to gas stations. According to Placer.ai, gas station traffic has declined year-over-year every week since mid-April. Meanwhile, visits to wholesale club gas stations rose double digits throughout most of April. BJ’s “comparable gallon growth”—the gas station equivalent of comparable store sales—surged from 1% in February to 10% in March and April, suggesting some members put extra effort into a search for cheaper gas. 

The draw of cheap gas could be a boon to wholesale clubs’ non-gas sales if shoppers tack in-store visits onto their trips to the pump. Costco CFO Gary Millerchip estimates “a little less than half” of gas station visits include an in-store visit. Costco sold more gas last quarter than ever before, which could have helped drive a 6% increase in non-gas comparable sales.

Millerchip advised against reading too much into the gas station’s role as a traffic driver. “I wouldn't say we've seen a dramatic change” in traffic trends as a result of gas prices, he said. “But we do think, over time, it’s a great way to build loyalty. When we look at our members that are engaged in gas with us, they are generally visiting more frequently overall, they're spending more with us overall, and they're also renewing at a higher rate.”

Granted, gas station traffic doesn’t always translate to more warehouse visits. BJ’s “didn't see a ton of that incremental value get into the club,” according to Eddy. And the price pressures drawing consumers to cheap gas can force them to cut back on spending inside the club. Excluding gas, BJ’s comparable store sales fell short of estimates last quarter. 

Traffic to discretionary retail locations turned negative on a year-over-year basis in mid-April, “pointing to a potential pullback in non-essential shopping trips,” according to Placer. Even trips to non-discretionary retailers like grocery stores and pharmacies fell below last year’s level around the time gas prices peaked in mid-May.