1Alphabet's search slowdown split Big Tech on who can fund its own AI spending
Alphabet fell about 12.6% on Thursday, which Fortune called its worst day as a public company. Revenue rose 25% and cloud roughly doubled. The problem was search. Gil Luria, head of technology research at DA Davidson, told Prof G Markets that search growth "appeared to abruptly slow down". That business is the company's main cash engine. He said Meta is now growing digital advertising more than twice as fast as Google. So the weakness looks specific to search, not to the ad market.
The second problem was cash. Capital spending passed $51 billion in the quarter, up from $45 billion. Free cash flow was negative $9.1 billion, Luria said. Microsoft showed the contrast. Azure growth accelerated to 48% from 43%, and free cash flow stayed positive, though down 27%. Luria credits Microsoft's habit of renting overflow capacity from neoclouds on short contracts. That way it does not have to build everything itself. His point is about funding. Microsoft does not need to borrow or sell shares, while Alphabet, Meta and Amazon do. Amazon also missed on third-quarter earnings and fell about 4% after hours, Yahoo Finance reported.
Luria warned that capital is "finite". He said Oracle cut its planned raise to $20 billion and moved to vendor financing. He was least sure where CoreWeave and other smaller builders will find money. The selling spread beyond the two companies. ServiceNow fell about 19% before the open on a weak quarter, Benzinga reported. Japan's Nikkei fell about 3% overnight on AI worries, and Nasdaq futures were down about 2% on Yahoo Finance's snapshot. A separate data point pulls the other way. Microsoft is offering voluntary buyouts to 27% of its global staff. Ed Elson, on Prof G Markets, notes that this would take headcount below its pre-pandemic level. He reads it as AI replacing jobs, not a correction of over-hiring. The so what: how a company pays for its AI spending now moves its share price, and search is the first core business to show an AI dent.
2December hike odds eased after core inflation came in exactly as forecast
September's core PCE index, the Fed's preferred inflation gauge, rose 0.32% on the month and 3.1% on the year, FRED data show (130.90, from 130.49). That matched the 3.1% forecast Michael Gapen, Morgan Stanley's chief US economist, gave Prof G Markets the day before. Real GDP grew at a 3.4% annualised rate in the third quarter. Strong growth argues for a hike, while inflation that merely matches forecasts takes away the urgency.
The markets took the second reading. On Kalshi, a 25bp December hike fell to 71% from 79%, and a hold rose to 28% from 20%. That move came on about $98,000 of 24-hour volume in the hike contract. Polymarket has the hike at 72.5%, down 5 points, on an event that traded $1.9 million in 24 hours. The ten-year Treasury yield closed at 5.05% on Wednesday, up from 4.99%. The timing does not say what drove the move, though. Alphabet's slide tightened financial conditions on the same day. Chair Kevin Warsh himself cited those conditions as tightening.
Expert views split in two directions. Gapen still expects hikes in December and March, with core PCE ending next year near 2.6%. He found Warsh's case for holding unconvincing, not wrong. Seb Mullins, head of multi-asset at Schroders Australia, told Equity Mates the market is "overshooting" on hikes. Asked whether the Fed will deliver the four or five hikes once priced, he said "Hell no". The so what: December is still priced as a likely hike, but a 71% contract can be moved by one data print. The October CPI and jobs reports, not Fed speeches, will settle it.
3Ceasefire odds fell sharply even as oil flows through Hormuz recover
Polymarket's contract on the US–Iran ceasefire lasting through the midterms fell 11 points to 82.5%, on $219,000 of 24-hour volume. A ceasefire through 30 November is priced at 35%, and through 31 December at 24%. Those odds point to the window after the vote. Prof G Markets reported that the US may strike Iran again after the midterms, with Brent near $114 a barrel on Wednesday. Overnight, December WTI traded near $103, up 1.3%, on Yahoo Finance's snapshot.
The physical picture is improving. Mullins said Schroders' energy analysts track tankers daily. He said 17 to 18 million of the 20 million barrels a day at risk are moving again. Insurance and war risk, not lost supply, keep the price high in his reading. Corporate buyers are still hedging. Reuters reported that QatarEnergy is buying US and other LNG to protect against future Hormuz disruption. South Korea is weighing a naval deployment to the strait. Polymarket puts Hormuz traffic back to normal by year-end at 10.5%. A US–Iran Hormuz agreement by 30 November is at 23.5%.
The two forces conflict. Recovering flows argue for a lower oil price, while falling ceasefire odds argue for a higher risk premium. The odds moved on the post-vote strike window, so the risk premium is likely to dominate in the near term. The so what: oil may not fall with the physical recovery until the post-midterm window passes without strikes.
4Half the S&P 500 is now one AI bet, while most of its members sit well below their highs
Kai Wu, of Sparkline Capital, used Excess Returns to show what index funds actually hold. On his measure, about 49% of the S&P 500 is AI infrastructure: the largest tech firms, chipmakers and data-centre operators. That is up from 25% in September 2019. The Nasdaq-100 is at 67%. Weighted by size, the S&P's 500 members behave like about 50 stocks. Dedicated AI funds look "uncannily similar" to the Nasdaq. Emerging markets no longer diversify, he argued, because TSMC, Samsung and SK Hynix now lead them. Their excess-return correlation with AI stocks is about 0.7, against a long-run average near zero.
Wu's history lesson is the bear case for the builders. He said that in railroads, telecoms and the dot-com era, the infrastructure providers never captured the long-run value; the users did. Today, firms that adopt AI early trade at the same valuations as laggards. In his view that is where the overlooked upside sits. He was promoting a free analytics tool and runs funds built on this thesis.
Beneath the index, two sources measured the damage the same way. Felix Prehn, on Felix & Friends, said six in ten US stocks are down more than 20% from their highs. Mullins said more than half the S&P 500 is. Both read it as fear already paid. Prehn adds midterm seasonality: he says the S&P averaged 16% in the year after a midterm. He also adds the fastest money-supply growth in four years. His video sells a free webinar funnel. Mullins was more careful. His firm's crash indicator flagged poor breadth a month ago and turned off as of recording. The so what: index investors hold far more AI-builder risk than the "500 stocks" label suggests. That cuts both ways if the builders stumble.
What the sources recommended
Two single-name calls came out of five episodes, both from one video. Ross Givens sold a $5 trading membership in the same video. He argued that brokers profit from the commercial property crash that is hurting landlords. Jones Lang LaSalle was his main pick. He cited third-quarter revenue of $7.3 billion, up 12%, and adjusted earnings per share of $6.76, up 50%. US leasing revenue rose 39% and investment-sales fees rose 33%, both far ahead of the market's volumes. He also cited a new $500 million buyback and about 12 times forward earnings, against roughly 19 for the S&P. He named its one real credit exposure: loss-sharing on $26.8 billion of Fannie Mae apartment loans. He judged that risk small.
His cheaper alternative, Cushman & Wakefield , came with a stated caveat. He called it riskier because of about $2.4 billion of long-term debt, though nothing matures before 2030. He cited about 7.5 times forward earnings and a free-cash-flow yield near 10%. He said its 4 November results will show quickly whether the thesis holds. He blamed the sector's selloff on rising Treasury yields. He also said office landlords Vornado , BXP and SL Green fell 20% or more, and that the broker CBRE and the smaller Newmark were sold alongside them.
Oil majors, Apple and the midterms test these claims within a week
Exxon and Chevron report before today's open, with AbbVie and Colgate. They will show how much of the $100-plus oil price reached earnings. Intel reported after Thursday's close, a result today's sources did not cover. Apple and Berkshire Hathaway follow on 2 November, per Finnhub's calendar. The midterms fall on 3 November, and Cushman & Wakefield reports the next day. The ceasefire contracts will begin to resolve within days of that vote.
