CPI DATA, MARKETS TRY TO REBOUND | MARKET OPEN

SUMMARY

Amit Kukreja analyzes the market's surprising resilience in the face of hotter-than-expected CPI data, rising oil prices, and high bond yields. The episode covers earnings highlights, insider buying, AI sector optimism, and the ongoing impact of geopolitical tensions on equities.

MAIN POINTS

• CPI data comes in at 3.4% year-over-year, matching expectations but remaining above the Fed's target. [1:00]
• Markets react positively to a pullback in oil prices and slightly lower bond yields after a volatile previous session. [3:01]
• Fed rate hike probability jumps to 90.4% following CPI and PPI data, yet equities open green. [4:00]
• Oracle reports strong earnings, with revenue and adjusted EPS both up 30% year-over-year, fueling optimism in tech stocks. [7:02]
• Oracle's cloud infrastructure and AI-related growth are highlighted, with significant GPU deliveries and robust RPO figures. [9:00]
• OpenAI pauses new $200 pro subscriptions due to overwhelming demand, underscoring compute shortages and benefiting Oracle. [11:00]
• Anthropic researcher warns of existential AI risks, contrasting sharply with optimism from AIPCON attendees and industry leaders. [14:01]
• Industry interviews at AIPCON reveal widespread optimism about AI's potential to solve real-world problems, countering doomer narratives. [17:00]
• Anthropic publishes a threat report on misuse of AI models, while institutional investors express uncertainty about supporting its IPO. [19:01]
• Nvidia CEO Jensen Huang reaffirms his multi-trillion dollar AI infrastructure forecast, emphasizing ongoing demand and dismissing circular financing concerns. [22:01]
• Markets open with strong gains in major tech and airline stocks despite macroeconomic uncertainty and high rate hike odds. [24:01]
• SpaceX announces a new billion-dollar compute contract, aiming for $100 billion ARR, while growth stocks rally. [27:00]
• Options market activity increases, with rumors of major players leveraging up on flex options in semiconductor and AI names. [29:00]
• Microsoft plans to triple data center capacity by 2032, reinforcing the bullish case for cloud and AI infrastructure providers. [32:00]
• Emerging market stocks and international names struggle amid rising oil prices and geopolitical tensions, while fundamentals remain strong for select companies. [35:01]
• Trump links market resilience to his Iran policy, arguing that the absence of a nuclear Iran justifies current market highs. [37:01]
• Investors continue to favor AI and growth stocks as inflation and rate hike fears persist, with gold, silver, and Bitcoin also rebounding. [40:00]
• Insider buying surges at companies like Uber and GameStop, signaling management confidence amid macro headwinds. [43:00]
• Ethereum breaks above $2,600 for the first time in months, boosting crypto-related equities and platforms. [47:01]
• Political debate intensifies over inflation, with Trump promising $5,000 payments to voters and economic advisors defending policy impacts. [51:01]
• University of Michigan consumer sentiment data comes in weak, but crypto and equities continue to rally, defying traditional correlations. [56:01]
• Analysts debate the effectiveness of further Fed rate hikes as inflation is driven primarily by energy and food costs. [1:02:00]
• Bloomberg reports that 4-5% Treasury yields may become the new normal, driven by structural factors including AI investment and government debt. [1:05:00]
• Core CPI reaches its lowest level since 2021, with energy as the main driver of headline inflation, fueling debate over transitory vs. persistent inflation. [1:09:00]
• Speculation grows about leveraged options strategies in semiconductors and high-beta names, as traders anticipate potential reversals if macro conditions improve. [1:14:00]
• Plans are announced for a public investment portfolio, emphasizing transparency, research depth, and risk management. [1:21:01]
• Discussion on the risks and timing challenges of using LEAPS options in volatile names like Grab and Uber amid uncertain macro conditions. [1:27:01]
• Interviews with Cisco and Zeta executives highlight the value of partnerships with Palantir and the importance of deep industry research. [1:36:02]
• Challenges of finding undervalued sub-$20 billion companies are discussed, with emphasis on balancing risk and research rigor. [1:42:00]
• DeepSeek releases a new AI model reducing memory requirements, raising questions about the impact on memory chip demand and sector margins. [2:18:02]
• Concerns are raised about the ethics and risks of promoting thinly traded small caps, with a preference for larger, fundamentally sound companies. [2:23:01]
• The episode concludes with reflections on market cycles, the importance of research, and the resilience of equities despite persistent macro challenges. [2:28:01]

DETAILED ANALYSIS

The trading session opened with heightened anticipation following the release of the Consumer Price Index (CPI) data, which showed a year-over-year increase of 3.4%, exactly matching consensus expectations but remaining well above the Federal Reserve’s 2% target. This result, combined with a 0.4% month-over-month figure, signaled persistent inflationary pressure. Despite these aggressive numbers and a prior session marked by negative Producer Price Index (PPI) surprises, equity markets began the day in positive territory.

This resilience was further underscored by a sharp increase in the implied probability of a Fed rate hike, which surged to 90.4%—the highest level in recent months—up from 72.4% the previous day.

Market participants appeared to be recalibrating their risk assessments, with a notable shift in sentiment compared to the previous evening, when oil prices had spiked to $104 per barrel and U.S. Treasury yields approached 5%. By the morning, oil had retreated to $99.3 and the 10-year yield had eased slightly to 4.92%, still elevated but less alarming than the near-5% seen hours earlier.

This moderation in key macro variables contributed to a broad-based rally, particularly in high-growth and technology sectors.

Oracle’s quarterly earnings provided a significant catalyst for the technology rally. The company reported $19.3 billion in revenue and $1.92 in adjusted EPS, both up 30% year-over-year. Oracle’s Remaining Performance Obligations (RPO) reached $664 billion, a $209 billion increase from the previous year, reflecting robust demand for cloud infrastructure and AI-related services.

The company delivered 300,000 GPUs in the quarter, and its cloud infrastructure revenue soared by 121% year-over-year. The market’s focus was squarely on Oracle’s AI and cloud segments, as traditional software revenue declined slightly. Oracle’s positioning as a key provider of compute resources for AI leaders like OpenAI was further validated by OpenAI’s decision to pause new $200/month pro subscriptions due to overwhelming demand and compute shortages—a move interpreted as bullish for Oracle’s future growth.

The episode also delved into the contrasting narratives surrounding AI. While a prominent Anthropic researcher warned of existential risks from advanced AI models, industry sentiment at AIPCON was overwhelmingly optimistic. Executives from companies like Nvidia, Palantir, and Zeta highlighted AI’s transformative potential in healthcare, logistics, and manufacturing.

Nvidia CEO Jensen Huang reiterated his forecast of a $3-4 trillion AI infrastructure buildout by 2030, noting that actual demand may exceed these estimates due to the proliferation of agentic inference and open-weight models. Huang also dismissed concerns about circular financing in the AI sector, emphasizing that Nvidia’s revenue growth is underpinned by genuine customer demand.

Despite the macro headwinds, including geopolitical tensions in Iran and the Middle East, the market’s focus remained on earnings and secular growth drivers. The S&P 500 opened with a 1% gain, and major tech stocks like Nvidia, Apple, Micron, and Oracle all posted early advances. Insider buying was another notable theme, with Uber’s CEO and COO purchasing $10 million and $5 million in company stock, respectively, at prices near recent lows.

Similar insider activity was reported at GameStop and Palo Alto Networks, signaling management confidence in the face of adverse conditions.

The options market saw increased activity, particularly in so-called flex options, as major players like the situational awareness hedge fund were rumored to be leveraging up in semiconductor and AI names. This leveraged positioning was interpreted as a bet on a continued rally in high-beta sectors, despite the risk posed by elevated rates and volatile energy prices. Microsoft’s announcement of plans to triple its global data center capacity by 2032, with a significant portion dedicated to AI-specific compute, further reinforced the bullish case for infrastructure providers like Oracle and Dell.

However, not all sectors participated equally in the rally. International and emerging market stocks, such as Mercado Libre and New Bank, struggled amid rising oil prices and geopolitical uncertainty. The episode emphasized the importance of maintaining a long-term perspective and focusing on fundamentals, particularly for companies with strong growth trajectories and robust balance sheets.

The discussion highlighted the challenges of timing market bottoms and the necessity of patience when macro factors temporarily overshadow company fundamentals.

Political developments also played a role in shaping market expectations. Former President Trump linked the resilience of U.S. equities to his Iran policy, arguing that preventing a nuclear Iran justified current market highs. He further promised $5,000 payments to voters if Republicans prevailed in the midterms, a proposal met with skepticism regarding its feasibility and inflationary impact.

Economic advisors debated the effectiveness of such stimulus and the broader implications for inflation and consumer sentiment.

Crypto assets experienced a notable breakout, with Ethereum surpassing $2,600 for the first time in months and Bitcoin also rallying. This move was attributed to a combination of factors, including the market’s apparent normalization of high inflation and rate hike expectations, as well as anticipation of regulatory clarity from pending legislation like the Clarity Act. The traditional correlation between inflation, bond yields, and crypto prices appeared to break down, with digital assets acting as a perceived hedge against currency debasement.

Throughout the session, the importance of deep research and conviction in investment decisions was emphasized. Plans were announced for a public investment portfolio, with a commitment to transparency, rigorous analysis, and risk management. The discussion also addressed the ethical and practical challenges of investing in small-cap stocks, cautioning against the manipulation and hype-driven rallies that often characterize thinly traded names.

Late in the session, news emerged of DeepSeek’s release of a new AI model that significantly reduces memory requirements, raising questions about the impact on demand for memory chips and sector margins. While such innovations could pressure memory pricing, the exponential growth in AI workloads and agentic inference was expected to sustain long-term demand for high-bandwidth memory.

The episode concluded with reflections on market cycles, the interplay between macroeconomic forces and company fundamentals, and the ongoing resilience of equities in the face of persistent challenges. Despite elevated oil prices, high bond yields, and geopolitical uncertainty, the market’s focus on earnings growth and secular trends in AI, cloud, and cybersecurity continued to drive optimism. The word of the day, “anacyclosis,” encapsulated the cyclical nature of markets and the inevitability of reversals following periods of dominance and complacency.

As the trading week ended, attention turned to upcoming macro catalysts and the potential for further momentum if headwinds abated.

LINKS

• Amit Kukreja's official Twitter/X profile.
• Amit's Deep Dives Substack for detailed market analysis and reports.
• Free news terminal for financial and market news aggregation.

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