Key insights
- The author analyzes recent market movements, highlighting Microsoft's strong Azure growth and cash flow generation as positive, while
Today is the final test of a wild Fed and earnings week: the Q3 Employment Cost Index, expected at 0.8% after 0.9%, and Chicago PMI. After disappointing results last night, including Intel, Nasdaq-100 futures are down about 2%.
Monday and Tuesday: the chip rebound. Anthropic filed for its IPO with $16.3 billion in first-half revenue, and a $63 billion bank-backed vehicle to buy AI chips eased the funding fear. The Philadelphia Semiconductor Index rose 2.8% and 3.6%. SK hynix posted a record quarter with an 80% operating margin.
Wednesday: a hawkish hold. The Fed held at 3.75-4.00%, but two members voted for a hike. Markets price roughly 78-85% odds of a December hike.
Two very different hyperscalers. Microsoft grew Azure 48% and beat on free cash flow by nearly $10 billion. Alphabet showed negative free cash flow of $9.1 billion and $51.4 billion in quarterly capex, and fell 12.6%, its worst day ever.
Thursday: growth strong, inflation sticky. Q3 GDP grew 3.4% and jobless claims fell to 194,000, while PCE inflation rose to 3.6%.
The lesson: cash is king. Investors reward AI spenders that fund growth from cash flow and punish those that borrow heavily. Demand is not the problem. Financing and sentiment are.
My view. The 10-year eased to about 4.90% this morning, which helps growth stocks, but Brent near $116 is the risk. I stay invested in semis, memory and cloud, mainly through SMH and SOXX, my two largest positions, and add slowly on weakness. Disclosure: I also hold Microsoft, Alphabet, SK hynix and Intel.
Is this selloff a buying opportunity, or do sticky inflation and a possible December hike keep pressure on tech into year end? What ECI print would change your positioning today?
Opinion only, not financial advice.