Michael Burry is in his basement with the drumsticks again. (#GPUbackedsecurities)

Wall Street agreed to underwrite half a trillion dollars against graphics cards, and the only stock that didn't get paid for it was Nvidia's. Obi-Huang-Kenobi (read: Jensen Huang) spent Monday signing memorandums with the real-life illuminati… a.k.a., Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to mobilize more than $500 billion for AI infrastructure. Nvidia gave up its morning gain Tuesday and closed marginally lower. Woof. 

For context, the six firms set up special-purpose entities, which are shell companies built to hold exactly one thing, and those entities issue bonds. The money buys Nvidia racks. The racks get leased to AI labs, cloud providers, enterprises and governments, and the lease payments service the debt. The chips are the collateral. Translation: These are what 2008 fears are made of. 

Huang's pitch is that compute is now a real asset class, right alongside power lines and fiber… revenue-generating, durable, transferable. The product being sold is longer duration, usage-linked investment opportunities. Spoiler: Read Gossip bullet #1 below. 

Which means everybody sitting on dry powder loved it. Blackstone rose 4%. Apollo and KKR each gained more than 6%. Barbarians at the rack, basically. However, the part the Street is still chewing on is that every GPU on Earth depreciates on the same schedule, and Nvidia is the company that sets that schedule. When the next architecture ships, every rack inside every one of these entities eats sh*t on the same afternoon. Nvidia sells the chips at roughly 75% gross margins and takes equity in the vehicles buying them, which is why "circular financing" (or circle jerk memes, take your pick) trends every time this company opens its mouth.

Meanwhile, in stonk land, the market didn’t care. The S&P 500 fell 0.3%, the Nasdaq dropped 0.6% and the Dow shed 184 points. Blame the boats. Traders spent the morning pricing in a reopened Strait of Hormuz; Iran's Supreme National Security Council said it stays shut until conditions are met, and Foreign Minister Abbas Araghchi said there's "no possibility of restarting negotiations" while the US violates the June memorandum and refuses to compensate Tehran for it.

Because of this, WTI closed up 1.3% at $83.20 and Brent gained 1.4% to $88.91. Woof. Not to be outdone, On Holding had the worst day of its life. The Swiss sneaker company actually beat on earnings, CHF 0.35 adjusted against 0.34 expected, then put up CHF 850.3 million of revenue against a CHF 878.4 million forecast. Revenue came in softer than the foam they stuff in their own shoes. The real damage was guidance, full-year growth cut to the low-20% range after the company had promised at least 23%, and the stock got flattened roughly 22% to two-year lows. Nobody has ever bought a $180 running shoe because the EPS beat by a rappen. Roger Federer owns about 3% of it (don't open the app, Rog).

Elsewhere, communication services was the day's worst sector. Alphabet fell 3% and is now working on its fourth losing session in five since Google reshuffled its AI org, the reshuffle that walked chief scientist Jeff Dean out the door after 27 years. AppLovin lost 6% after Bank of America moved it to neutral and cut its target to $400 from $430, trimming 2027 revenue growth to 23% from 31%. Oh, and Apple dropped more than 1%. 

The lone green light was Jabil, which popped 6% on a UBS upgrade to buy. It builds circuit boards… which means, in this market, selling the boring hardware that Amazon, Meta and Google physically cannot build data centers without is apparently the safest trade on the board. Duh. 

Aaaaaand scene.

Today was another day of AI bubble p*rn, obviously. But if there’s anything to leave you with it’s this: Wall Street spent the session deciding it would rather own the guys writing the checks than the guy cashing them, and the actual toll road, the one with water in it, stayed closed the whole time. Nvidia reports on the 26th, so this thesis gets a receipt in two weeks. Place your bets accordingly, friends. Until next time… 

If you read all of this, congrats for having a 10 second attention span (better than me). As always, here’s our heatmap for today.

 

☕ Market Gossip

> AI computing power is becoming a tradable asset class as CME launches futures contracts (CNBC): Vlad Tenev just went from six to midnight… 

> Delta Probing Unauthorized Wi-Fi on Flight After Hacker Event (Bloomberg): Was it free tho? 

> Brad Lightcap, OpenAI’s longtime COO, is leaving to ‘start something new’ (TechCrunch): *the something new*  

> Riot Platforms strikes deal with Anthropic as bitcoin miners shift focus to AI infrastructure (CNBC): “Somebody say ‘riot’?” - @sama reading this probably… 

“WTF” Meme of the Day

Another round of generationally large IPO szn can’t come soon enough…

 

At the time of publishing, Stocks.News holds positions in Apple and Alphabet (Google) as mentioned in the article.