STOCKS TRY TO GET SOME BOUNCE, YIELDS CONTINUE HIGHER, MACRO THURSDAY | MARKET CLOSE

SUMMARY

Amit Kukreja provides an in-depth analysis of a volatile trading day marked by sharp reversals in technology and AI-related equities, with particular focus on semiconductors, CoreWeave, and the interplay between bond yields and market sentiment. The discussion features detailed breakdowns of institutional moves, macroeconomic factors, and sector-specific developments, offering insights into market resilience and ongoing uncertainties.

MAIN POINTS

• Major indices and semiconductor stocks experience sharp volatility, with some names reversing early losses and speculation about a market bottom emerging. [2:00]
• Amit details his own dip-buying activity in retirement accounts, highlighting specific entries in Nvidia, SoFi, Broadcom, Rocket Lab, Tesla, SMCI, and TSM. [6:03]
• Rumors circulate about Value Aligned Research Advisors facing distress, with debate over the validity of these claims and their potential market impact. [9:00]
• The market closes with many stocks recovering from intraday lows, but questions remain about the causes of recent declines and the sustainability of the rebound. [13:00]
• IBKR reports earnings in line with expectations, showing strong growth in margin loans and customer accounts, while the absence of major fund liquidations is noted as a relief. [17:00]
• Josh Brown analyzes the relationship between rising rates, AI capex, and bond issuance, suggesting corporate debt supply is a key driver of yields. [21:01]
• Meta and Apple announce a partnership on AI model deployment, while TSMC posts strong earnings amid a challenging market environment. [25:01]
• Brad Gerstner of Altimeter explains his firm’s exit from CoreWeave and reduction in AI exposure, citing concerns about overextension and the need for consolidation. [29:00]
• Guest Chris Patel discusses CoreWeave’s bond yield spike, the role of private institutional debt, and the market’s sensitivity to AI capex financing. [32:00]
• The conversation turns to the scale of AI capital commitments and the market’s fragility, with concerns about the sustainability of trillion-dollar spending plans. [37:00]
• Chris Patel describes his own trades, including options on Micron, and highlights the positive narrative shift following news of long-term supply agreements with Google. [39:01]
• Discussion centers on sector rotation, the potential for capital to flow from AI to traditional sectors if AI capex slows, and the implications for broader market stability. [43:00]
• Portfolio strategies are debated, with suggestions to balance exposure between equal-weighted indices, bonds, and selective short positions on high-risk tech. [49:01]
• The competitive landscape between Nvidia and Broadcom is examined, focusing on custom silicon, pricing power, and the shift toward ASICs in AI infrastructure. [53:01]
• Broadcom is argued to have more upside potential than Nvidia due to market share gains and projected earnings growth, while AMD’s prospects are discussed in the context of CPU demand. [59:03]
• The future of AI capex is debated, with the consensus that efficiency and custom chip development by hyperscalers could alter the semiconductor landscape. [1:04:01]
• Political risks to data center expansion are highlighted, with bipartisan opposition to local projects potentially affecting the pace of AI infrastructure growth. [1:09:00]
• After-hours trading sees AI stocks dip following news of Anthropic’s lower IPO valuation, prompting debate on the implications for sector funding and capex. [1:14:00]
• Recent trading strategies are reviewed, emphasizing the importance of volatility, technical signals, and platform choice for active traders. [1:21:01]
• Market strategists discuss the risks of concentrated AI exposure in index funds and ETFs, warning of potential cascading effects if leading tech stocks are sold off. [1:27:01]
• Historical analogies are drawn to previous bear markets, with speculation about whether the current environment could signal a more significant correction or a continued bull run. [1:35:02]
• The session concludes with a look ahead to major tech earnings, ongoing macro uncertainties, and the unresolved questions surrounding CoreWeave’s debt and the durability of the AI trade. [1:46:00]

DETAILED ANALYSIS

The trading session unfolded against a backdrop of heightened volatility, particularly within technology and semiconductor sectors. Early in the day, major indices such as the S&P 500 and prominent semiconductor names experienced sharp declines, only to recover much of their losses by the close. This intraday reversal fueled speculation about whether a market bottom had been reached or if the rebound was merely a temporary relief rally.

The session was characterized by significant price swings in stocks like CoreWeave, Nvidia, Micron, and others, with CoreWeave notably reversing a steep pre-market decline to finish up 5% on the day. This turnaround was attributed to a combination of technical oversold conditions, algorithmic trading dynamics, and a wave of dip-buying from both retail and institutional participants.

Amit Kukreja provided transparency into his own trading activity, detailing a series of purchases made in his retirement account as funds cleared midday. His allocations included $1,000 each into Nvidia at $182, SoFi at $14.78, Broadcom at $339.45, Rocket Lab at $53.44, Tesla at $361.74, SMCI at $34.27, and $1,500 into TSM at $420.31. The rationale behind these buys centered on long-term conviction in the earnings power of these companies, particularly in semiconductors and select growth names, despite short-term valuation concerns.

Kukreja also reported a profitable intraday trade in CoreWeave, capitalizing on its volatility.

The market narrative was further complicated by rumors of distress at Value Aligned Research Advisors, a fund heavily exposed to semiconductor and AI-related equities. The credibility of these rumors was debated, with some citing Martin Shkreli’s early reporting as a reason to take them seriously, while others dismissed the likelihood of a major institutional blowup. Regardless, the episode highlighted the market’s sensitivity to potential forced liquidations and the interconnectedness of sector-specific stress with broader price action.

Bond yields and their relationship to AI stocks emerged as a central theme. The 10-year Treasury yield, after declining sharply, began to rise again as equities rebounded, underscoring the inverse correlation that has developed between long-duration yields and high-growth tech valuations. The discussion referenced recent CPI and PPI data, which contributed to inflationary concerns and complicated the outlook for both equities and fixed income.

Notably, Jensen Huang of Nvidia sought to reassure markets regarding CoreWeave’s financial health, stating that Nvidia would not need to backstop the company and that CoreWeave’s cost of capital was decreasing. While this calmed some fears, uncertainty persisted about the drivers behind aggressive selling in CoreWeave’s debt.

Institutional positioning was brought into focus with Brad Gerstner of Altimeter disclosing the firm’s complete exit from CoreWeave over the past several months. Gerstner explained that the decision was motivated by a belief that AI valuations had overshot fundamentals and that a period of consolidation was necessary. Altimeter redeployed capital into Meta and re-initiated a position in Tesla, reflecting a strategic shift toward perceived stability and long-term growth.

The timing of these moves, particularly the liquidation of over 6 million shares of CoreWeave, raised questions about insider knowledge or broader concerns within the AI ecosystem.

Earnings reports provided additional context. Interactive Brokers (IBKR) posted results largely in line with expectations, with notable growth in margin loans, customer accounts, and net interest income. The absence of high-profile fund liquidations was seen as a positive, suggesting that the day’s recovery may have a more durable foundation than initially feared.

Macro perspectives were enriched by guest appearances. Josh Brown articulated the view that the recent surge in bond yields was driven less by inflation expectations and more by the supply of corporate debt, particularly from companies financing massive AI-related capital expenditures. He advised investors to consider diversifying beyond semiconductors, as market leadership could shift if the AI capex cycle slows.

Chris Patel provided a granular analysis of the CoreWeave bond situation, explaining that the company’s debt is privately syndicated and primarily held by institutional investors. The shrinking pool of willing buyers and the perception of CoreWeave as the weakest among the so-called neo clouds contributed to the spike in yields. Patel emphasized the importance of monitoring earnings and forward guidance from hyperscalers, as any indication of reduced capex could trigger renewed market stress.

Sector rotation and market bifurcation were recurring themes. The panel discussed how capital could flow from AI and high-growth tech into traditional sectors such as consumer staples, healthcare, and real estate if AI capex decelerates. This dynamic was evident in the day’s trading, with stocks like Zillow and Home Depot rallying as yields fell, benefiting from the prospect of lower borrowing costs.

The resilience of the broader market, despite sharp drawdowns in select names, was attributed to this rotation and the underlying strength of corporate earnings.

Portfolio construction strategies were debated, with suggestions to balance exposure between equal-weighted indices (RSP), long-duration bonds (TLT), and selective short positions on the S&P 500 or semiconductor ETFs. The rationale was to hedge against concentration risk in mega-cap tech and to capture potential upside in undervalued sectors. The conversation also touched on the limitations of shorting sector-specific ETFs like SMH, given the possibility of sharp reversals.

A key point of contention was the competitive landscape among semiconductor companies. Broadcom was highlighted as having greater upside potential than Nvidia, owing to its increasing market share in custom ASICs and projected earnings growth. The shift toward in-house chip development by hyperscalers such as Microsoft, Amazon, and Meta was seen as a threat to Nvidia’s pricing power, with Broadcom and TSMC positioned to benefit from the diversification of AI infrastructure.

The discussion acknowledged that while Nvidia remains dominant, its growth rate may decouple from the overall expansion of AI capex as custom solutions proliferate.

The sustainability of AI-driven revenues and the risk of overextension were examined through the lens of recent IPO valuations. News that Anthropic was considering a lower IPO valuation of $1.5 trillion, down from $2 trillion, was interpreted as a healthy correction for the sector. While this could limit the amount of capital raised for future expansion, it was seen as a necessary step to restore balance and reduce speculative excess.

The after-hours dip in AI stocks following this news was viewed as a short-term reaction, with longer-term implications for funding and competitive dynamics.

Political and regulatory risks to data center expansion were also discussed. Bipartisan opposition to local data center projects, driven by concerns over property values, environmental impact, and community disruption, was identified as a potential headwind for continued AI infrastructure growth. The conversation noted that both Republican and Democratic constituencies have expressed resistance, which could slow the pace of buildouts regardless of national policy priorities.

Throughout the session, the importance of monitoring macroeconomic indicators, earnings guidance, and sector-specific headlines was emphasized. The market’s resilience in the face of multiple headwinds—including inflation, rising yields, and sector-specific stress—was attributed to robust corporate earnings and the adaptability of capital flows. However, the unresolved questions surrounding CoreWeave’s debt, the durability of the AI trade, and the potential for further rotation or correction left the outlook uncertain.

Looking ahead, attention will turn to upcoming earnings from major technology companies, including Netflix, Tesla, and Meta, as well as ongoing developments in the bond market and regulatory environment. The consensus among participants was that while the market may be closer to a bottom, continued vigilance is warranted given the complexity and interconnectedness of the current landscape.

LINKS

• Amit Kukreja's Twitter profile for market commentary and updates.
• Amit's Deep Dives Substack for in-depth stock and market analysis.
• Free news terminal for financial news and research.

KEYWORDS