Good afternoon….early one today as I need to head out before the close (all prices as of 3:30pm ET). QQQs -9bps after climbing out of another AI-financing scare this morning (down as much as -1.1%): Korea’s KOSPI fell -3.7% overnight as neocloud Elice closed 32% below its IPO price on day one (MK in TMTB Slack here: “I’m baffled on headlines every where that AI trade is dead based on some Korean 550 million market cap small cap...”), SoftBank’s CDS hit a four-year high and CRWV made new 52-week lows.
The market turned on reports around 9:15am ET that the US and Iran had backed a Qatar/Pakistan compromise proposal, plus a weak pending home sales print that pulled yields lower, with small caps leading (IWM +1.7%). Breadth flipped from yesterday’s narrow bounce (~70% of the S&P down) to ~85% of S&P stocks up by late morning. Semis +31bps came back from -2.4% at the lows, neoclouds and optics reversing hardest (CRWV +2.5%; MRVL +2%; COHR +20bps; CRDO +39bps, off lows of -4.5% to -7%), while semicap lagged (LRCX -2.6%; KLAC -2%; AMAT -1.6%) and TSEM -7% sank on a SemiAnalysis note. Software +1% led tech, with app software ripping as CRM agreed to buy BRZE at a 58% premium (MNDY +7.6%; FIG +6%; HUBS +7%; BILL +6.6%). SE -9% the main laggard again on its cloud foray and META -2.3% into tomorrow’s print.
The drivers & debates at the center of the AI semis trade (financing, power supply, labs ARR, frontier vs. open source) continue to be the focus of conversations this week. We’ve spent the past week modeling Anthropic out given the details we received last week, and the lower Q3 ARR raised a handful of questions we hadn’t thought about enough, ones we suspect a lot of investors are grappling with as well and will be thinking about as the S-1 comes out (we’re working on a longer post). A lot of good back and forth in #anthropic-ipo in Slack on the topic, which we’ll recap below: