Good afternoon. QQQs +1.2% driven by Waller’s comments. Waller — one of three most important voices on the Fed — had dovish remarks today, noting significant improvement in inflation while saying underlying trend is even better than it looks once services are adjusted, signaling 9/16 rates might be left unchanged. Fed expectations consequently moved in a dovish direction , w/the market now pricing in 33bp worth of hikes this year (down from 45bps a few days ago) and approximately 50/50 odds of an increase on 9/16. We get the jobs report tomorrow.
The other big item of the day was OpenAI announced release of Astra. We won’t post all the great benchmarks here (they look good), just go on X and your feed will be crowded with them. Here’s some real world feedback and one benchmark:
Yup, momentum has had a huge drawdown:
Let’s get to the good stuff…
AI/SEMIS
CLS +11.5% as bulls will say AVGO’s $230B FY27/FY28 AI guide de-risked the size and duration of the custom-XPU build cycle, including OpenAI ramping from 1.3GW in FY27 to more than 5GW in FY28. The read-through: CLS is OpenAI’s named Jalapeño partner for board, rack and system integration and scalable production, so a larger OpenAI deployment means materially more potential CLS content. Investors also extrapolated upside from AVGO’s broader multi-GW XPU ecosystem and AI networking growing as fast as XPUs, although AVGO didn’t disclose a new CLS order on the call.
NVDA +1.8% acting better and getting close to testing ATHs from back in May. If it does clear the May highs, I’m submitting this chart to the Guggenheim.
AVGO -3% as debates on the stock weren’t settled. Bulls focused on 2 year outlook being de-risked and stock trading at 10x buyside ‘28 numbers while bears said they came away feeling the story has become uncomfortably more complex, saying growth is increasingly dependent on OpenAI and Anthropic rather than Google, where Hock’s commentary was weaker.