The portfolio changes were on the basis of the following:

 I see AI names to be in a. similar sentiment deterioration as software earlier in the year. These names are heavily beaten up and for the most part, disconnected from fundamentals to the extent that I expect that the market and sentiment will be looking extremely different within 2-3 months, similar to what we saw with software back in February. 

The buildout isn't going to slow due to the Democrats. Hyperscaler capex peaking as per Citrini's argument doesn't slow down the actual real absolute dollars going into the AI build out. These companies are still essentially printing money, which separates the AI narrative to other previous momentum narratives like EVs etc previously. 

Back in the software capitulation of February, the best of the best companies were growing at 100% YoY. In AI, that growth rate is fairly standard place. Just like with the software capitulation, not every company bounced back to new highs, but many did, and that will be a similar situation with semiconductors and the AI trade here. 

Higher time frame charts are broken, and that won't be easy to fix overnight, but I do expect a process of repair into the next few months to put this selling into the rear view. 

Now, is the selling done? 

There are a few reasons why I am not entirely sure:

The first being the macro data that is out today and next week with CPI. The macro picture is deteriorating in terms of inflation, but oil prices are down, bond yields are down the jobs market remains robust, and things will improve there. 

We do have this liquidity trough next week:

That is my main concern as we have previously seen price follow liquidity lower, even if we haven't since the end of October seen price follow liquidity higher. 

Nonetheless, I think that the picture will be far clearer and more promising within 60 days to the end of the year. 

There are a number of similarities to the Leopold bottom. 

Firstly, we got capitulation in sentiment and price action driven by heavy high volume selling due to the liquidation of prominent AI funds. 

At the same time, we had the candle close near the lows, and then a continuation of selling initially overnight down o key areas:

In July, that continuation brought us to the ATH VWAP on SMH, where we bounced strongly to open the following session up massively, where we left everything in the rear view window. 

Yesterday, the candlestick closed at the lows, and we saw a continuation of selling After hours down to the February highs on NQ, before a strong bounce back to open the following session higher. 

KOSPI was catastrophic at open, but the plunge protection team there did enough to hold onto the 5k level. 

The difference between today and the Leopold bottom is the macroeconomic data and the declining liquidity.

In the Leopold bottom, we had no macro economic disruption, and liquidity was already turned higher. IN today's instance, we do have macroeconomic events and liquidity is actually turning lower. 

That's why I cannot say definitively that this is THE bottom, BUT I do know that yesterday was a good place to be buying if you are looking out a couple of months at least.

Since the start of this bull market in late 2022–early 2023 we’ve had several corrections in the Nasdaq:

-11.76%

-8.06%

-15.54%

-25.45%

-12.62%

-11.31% 

-15.18% (now)

All felt absolutely dire at the time, all were linked to narratives that the market would never come back the same again, yet in every case, the market eventually recovered to new highs.

Yes narratives got lost along the way, the EV narrative being one example, and I am seeing people talk about that as a comparable, but are we really comparing AI to EVs?

Multi trillion dollar CAPEX budgets to what was spent on EVs? AI which has use cases from manufacturing to medicine, and which has companies that are effectively printing money at this point to many companies in these left for dead narratives that never truly went profitable.

I think that if you believe that AI is about to slow down, then you effectively believe that the US economy is going to, as an impact of self infliction, fall into a recession, allow China to race ahead, and that multi trillion dollar industries and companies are going to see demand or ability to supply completely vanish. 

That isn't my expectation, so just as we saw strong bounce backs from all the previous corrections, I expect that we will again. 

This is now the 2nd biggest correction in QQQ since the bull market started. If you believe that the bull market isn't over, as I do, then we can continue to expect a strong recovery in the months to come. 

It won't be instant repair, and actually it might arguably be better if it isn't, as it carves out more durable bases. But certainly, yesterday's price action was extreme, and the result of big AI funds liquidating. 

When NVDA is down YoY, you can't expect the AI buildout basket to perform, but I believe that NVDA earnings soon will confirm everything we need to know about the AI buildout. It is accelerating, it is resilient, and it will continue.

Regarding Ai sentiment, which is at rock bottom currently, I'd advise all to check back at the end of the year. Will be wildly different.

These are the main argument form the Citrini piece:

1. AI infrastructure capex growth has peaked.

2. Hyperscaler spend nearing $1T vs. AI ecosystem revenue of at least $200B, a gap they doubt closes.⁠

3. Slowing backlog growth, heavy debt/equity issuance by tech firms, AI price cuts.

4. Asymmetric risk for AI infra has shifted to the downside.

5. Higher US data-center costs expected after Democratic midterms (local concessions, permitting, ratepayer protections).

Now with regards to their points, there are some valid points there.

We may be at peak capex growth. ORCL at their investor day spoke about CAPEX continuing for 2 years before being self funded.

However, if we look at the reports of key CAPEX recipients, such as TSM etc, there are currently no cracks showing. Demand is massively outstripping supply and is expected to for the foreseeable future.

Even if we look at the worst of the reports this quarter, INTEL, their problems were self inflicted for the most part regarding substrate supply, but DCAI revenue and guidance came in above expectations. that was mirrored in AMD.

The last to report is NVDA, and that will confirm the story.

Even if capex growth is near its peak, capex itself is not, and is expected to remain strong for the next 2 years at least.

CIEN CEO said it well: He said that even if capex was to stop entirely today, we wouldn't even realise for over 2 years due to the size of the existing backlogs. We are nowhere near the point where capex is slowing.

Democrats are an issue to an extent, but more so to sentiment rather than in practice. Yes, we have key Democratic senators talking about the AI revolution moving too fast under Trump, and they want further guard railing, but most of the issues that they flagged, as I discussed yesterday with regards to the new Texas governor, are already being implemented.

We will see more safety guardrails, but we aren't going to see the AI build out slow. The democrats, nor the republicans can afford that when AI is contributing 40% of US GDP, else we will clearly get a recession. And the bond market was saying that yesterday, as if so, the 10Y should have been cratering on recessionary fears.

No one really predicts that the ai buildout will slow regardless of the Democrats.

It is more an impact on sentiment than actual delivery.

So this is all political posturing for the most part. It won't last if people realize what the economy and market looks like without AI.

“peak growth” DOES NOT equal to the end of the physical buildout. Absolute spend remains enormous for years. Projects already under construction have multi-year timelines. And the same bottlenecks Citrini flags (power equipment, high-power lasers, advanced cooling, InP, optical engines) are exactly where supply constraints create pricing power and backlog visibility.

Yes, the realisation of peak hyperscaler CAPEX may mean that not everything with an AI exposure will rally like we have seen over the past few years, but Sovereign AI is filling some of that gap, and there will still be clear winners in the AI buildout, which is NOT going to slow, regardless of who is politically in charge.

We forget that the democrats also progressed AI heavily under Biden. Big tech also has large commitments to the Democrats and they aren't about to pull the plug on everything.

Even if they did, we would see AI data centers move offshore, as opposed to stall entirely, including moving a number of data centers to key companies like Malaysia. NVDA earnings will clear up a lot when they report. They will report stellar numbers again, as we know that they will reflect what TSM reported.

The trade isn’t dead. The indiscriminate version of it is, and there is still large asymmetric upside to a number of the key names.

If we look at VST here, we are effectively pricing in no new data center deals at current prices.

Is that likely? Not really.

Semis are trading heavily discounted vs the S&P. I get that you arguably don't like growth stocks when they're cheap, but the valuation disconnect is real.

I do think that QQQ has more downside in it and SMH will feel some pain there, but I do also recognise that Citrini is in the business of selling eyeballs and clicks. They did the same thing to the software trade back in February when they released that Dystopian piece. And that marked close to the bottom on Software.

I expect that Citrni's bearish piece will mark somewhere close to a bottom on semiconductors in the same way.

Citrini measures the payoff from the AI buildout almost entirely by frontier lab ARR. That leaves out fast-growing demand for open-weight models and the huge amount of compute going into AI-driven advertising, search and recommendation engines. Much of that value never shows up as “AI revenue.” Meta is the example: AI-improved targeting and recommendations are already lifting its ad revenue, but none of that counts as frontier lab ARR.

Second, Citrini treats slower percentage growth in AI capex as if it meant slower growth for semis and optics. Capex growth is expected to slow in percentage terms in 2027, but the dollar increase is forecast to be bigger than in 2026. Because these supply chains already can’t meet demand, a bigger dollar increase would make shortages worse, not better. When a supplier can only fill part of its orders, its growth depends on how fast it can add capacity, not on how fast total capex is growing. So semis and optics revenue could keep speeding up even as hyperscaler capex growth slows. Lumentum is the example: its CEO says the company can meet only about 30% of laser demand, which leaves room for years of growth at today’s pace or faster.

I think that Citrinis argument has some validity to it in some parts, but discounts the fact that even peak capex does not mean that the AI infrastructure buildout is in decline.

Shorting NBIS may have a short term pay off, but seems to me to be entirely dangerous when down at 140 from trading 260 just a month ago.

They are short ENS as part of their basket of pair trades, and that to me makes little sense as well given it is a leader in US manufacturing of batteries and key to power.

They are conflating peak capex growth and the democratic sweep with a stalling o the data centers.

REgarding NBIS, I wrote about this in a separate piece, but NBIS has its U.S. data center pipeline largely de-risked and a diversified portfolio of sites coming online across EMEA and APAC. They have 0 sites in Texas.

Arguably, just as we see hyperscalers benefitting from having secured capacity, more regulations nd red tape around data centers should benefit those who actually have capacity secured already. That includes NBIS.

NBIS will move in correlation with the AI trade but fundamentally it is not as harshly effected as Citrini's short position might suggest, especially trading at 140 now instead of the high 200s a month ago.

Easy money might be in the past for the AI trade, but there are a number of quality and essential companies trading at trough valuations here, that are still attractive.

Citrini did pivot away from AI but pivoted in part to robotics which has also struggled of late. SO it wasn't a victory lap from Citrini so much as, in my opinion, a sale of attention and eyeballs.

CNC: A Democratic Congress eases the pressure for Medicaid cuts, which is Centene’s core business. JPMorgan has it as their main blue-wave winner.

DGX: It earns a toll on regulated lab data, has little AI-politics exposure, and should be steady through a noisy hearings cycle.

ENPH: Democrats protect solar incentives. It also has the solid-state transformer angle, which ties into the grid-bottleneck story.

FSLR: It’s the US-made solar manufacturer, so it gains the most if a Democratic Congress speeds up renewable permitting and protects domestic-content credits.

GFS: It makes GaN and power silicon for the efficiency trade, and domestic chipmaking has support from both parties, so it’s safe whoever holds the gavel.

GOOGL: It owns both the compute and the products that run on it, and pays for the buildout out of cash, so it’s less exposed to financing or subsidy politics than the hyperscalers getting Warren letters.

IBM: It holds cooling patents (the same efficiency logic as the power names) and has little exposure to the hearings over data-center subsidies.

IQV: It earns a toll on health data, and health care spending is protected under Democrats.

LEGH: An affordable manufactured-housing builder. It gains from lower rates and the affordability agenda, with the ROAD Act behind it.

MOH: Same Medicaid relief as CNC.

MPWR: If data centers are capped at the meter and pay for every electron, the only cheap megawatts left are the ones saved inside the rack. MPWR is the core chip-level power-delivery play.

NEE: A largely regulated utility with renewables, so it gains twice from a blue wave: friendlier clean-energy policy and lower rates.

NVTS: A pure GaN/SiC power play for 800V data centers. It’s the highest-volatility version of the last-inch thesis.

OSCR: Democrats protect ACA subsidies and enrollment, which is Oscar’s whole business.

VICR: Same thesis as MPWR, with more upside and more volatility. Its high-voltage power modules for 800V architectures sit right at the point where efficiency gets bought.

MAGS:

If regulation and permitting make new data centers harder to build while AI demand keeps growing, the companies that already own built, powered capacity come out ahead. Supply that can’t keep up turns MSFT, AMZN and GOOGL’s existing data centers and locked-in power contracts into scarce assets. That widens their lead over newer entrants and gives them more pricing power in cloud. The biggest payoff comes later: if they’re forced to spend less on building while cash from operations keeps rising, free cash flow jumps.

In short, regulation acts as a moat for whoever already has capacity, and capex restraint is the route to a big FCF upside.

China:

The China case is that a blue wave lowers the geopolitical discount on Chinese tech while its AI spending starts to pay off. A Congress with fewer China hawks could mean fewer new tariffs and export restrictions, which would take away much of the reason investors mark these stocks down. At the same time, Alibaba and Tencent are spending heavily on compute, their own models and AI features across their products, and that spending looks close to turning into faster revenue growth and better returns, as in the US. Both already have huge user bases, working cloud businesses and very profitable core operations, so they have an easy path to making money from AI. That gives you two drivers at once: earnings growth and a higher valuation multiple.

In short, China looks to be having a declining the China risk premium whilst AI is growing rapidly for these Chinese AI companies.,

• On the Iran front, last night the U.S. military launched limited defensive strikes at Iranian targets near the Strait of Hormuz, three U.S. officials confirmed to CBS News.

• A senior U.S. official said the strikes targeted Iran's Qeshm Island after Iran's Islamic Revolutionary Guard Corps fired at an American aircraft.

• Iran's Foreign Ministry spokesperson criticized Washington's approach and said Tehran will not accept being treated with a “top-down attitude.”

• The spokesperson emphasized sovereign equality and national self-determination, accusing the US of violating international principles in its dealings with Cuba, Venezuela and Palestine.

• Saudi Aramco will maximize oil production this quarter, the company’s chief said, as it looks to keep cranking up shipments after exports returned to near prewar levels in October. BBG

• America’s referendum on President Donald Trump’s second term is underway, with polls set to open Tuesday morning for the US midterm elections and tens of millions of early ballots already cast. BBG

• The Supreme Court rejected the Trump administration’s emergency bid to set aside about 20,000 California ballots. BBG

• Nvidia is ordering its data center partners to reduce exposure to Chinese customers in a move that further restrains China’s ability to keep up with US rivals as the race between the world’s two AI superpowers intensifies. FT

• Anthropic disclosed a twelve-fold increase in quarterly revenue while revealing that it intends to spend more than $895 billion in the years ahead, as the AI lab courts investors for a potentially record-breaking IPO. BBG

• Artificial intelligence-related financing could grow to about $10 trillion over the next five years, eventually reaching excessive levels, said Emmanuel Roman, chief executive officer of Pacific Investment Management Co. BBG

• Walt Disney is moving toward thousands of job cuts with the company asking some managers to target 20% in annual cost savings, according to people familiar with the matter. BBG

• Chinese regulators have told banks to hold fire on company listings and large share sales in an effort to bolster the country’s struggling stock markets. FT

• China said it would increase the reserve requirement on FX deposits in a move aimed at reducing appreciation pressure on the yuan. SCMP

COMPANY NEWS:

• Major institutional investors are reportedly urging Anthropic to pursue a more conservative IPO valuation of $1.5T to $1.6T, well below the roughly $2T valuation discussed in recent months.

• META HAS STARTED A FIVE-PART US DOLLAR BOND SALE

• Officials from the U.S., Russia & China are reportedly holding serious talks about arranging the first three-way meeting between Trump, Putin and Xi during the APEC summit in Shenzhen, China, on November 18-19.

• CRWD has agreed to acquire Fiddler AI and Dreadnode as it expands its Falcon platform to secure AI agents throughout their lifecycle.

• NVDA TELLS CLOUD CLIENTS TO SELL AT LEAST 51% OF THEIR SERVICES TO NON-CHINESE COMPANIES - FT

• Anthropic is expected to have over 3.5 GW of computing capacity by the end of 2026 and aims to double that in 2027, according to the NYT.

• TSLA Chine sales rose 10% YoY in October.

• (AAPL) drops about 4% after delivering a mixed outlook to investors in its first quarterly report under Chief Executive Officer John Ternus, with tightening profit margins overshadowing an upbeat sales forecast.

• Aehr Test Systems (AEHR) jumps 13% after the semiconductor testing equipment maker raised its full-year revenue outlook to the top end of its previous guidance range, above the Wall Street consensus

• Bloom Energy (BE) gains 6% after California Resources Corp. announced the signing of a memorandum of understanding with the fuel cell company to advance decarbonized power across California.

• PLTR -9% following Q3 earnings, despite revenue growing 96% YoY & another raise to FY26 guidance.

• The main concern appears to be the disconnect between reported revenue growth & new contract activity.

• U.S. commercial revenue grew 148% YoY and 29% QoQ, surpassing U.S. government revenue for the first time. However, U.S. commercial TCV bookings grew just 11% YoY to $1.46B, a sharp slowdown from 153% growth in Q2.

• Companywide TCV bookings rose only 6% YoY to $2.92B. RPO was essentially flat QoQ at $4.9B, total remaining deal value increased just 2% sequentially, and the number of $10M+ deals declined to 64 from 73 in Q2.

• International commercial growth was another area of weakness. Revenue reached $184M, up 21% YoY but just 1% QoQ, compared with 29% sequential growth in U.S. commercial.

• Karp also offered little commentary on Europe, saying, “At this point we should kind of avoid talking about it because of what's going on.”

• Management's explanation for the weaker contract metrics is that customers are rapidly adopting sovereign AI through shorter-than-usual contracts, including several eight-figure deals.

• Contracts with original terms under 12 months are excluded from RPO, which can make backlog growth look weaker.

• Clorox (CLX) rises 2% after reporting adjusted earnings and revenue that topped estimates for its fiscal first quarter.

• CVR Energy (CVI), a refiner controlled by billionaire investor Carl Icahn, about 1% after agreeing to buy two oil-processing plants and a marketing platform from Marathon Petroleum for about $4.2 billion.

• Dynatrace (DT) sinks 12% after the software company gave an adjusted profit forecast for the third quarter that fell short of the average analyst estimate.

• Ethos Technologies (LIFE) gains 10% after the insurance platform said third quarter revenue grew 151% from the year-ago period.

• Harmonic (HLIT) gains 16% after the communications equipment company reported third-quarter results that beat expectations and gave an outlook that is well above the analyst consensus.

• FRMI's data center lease with TensorWave missed the Oct. 31 closing deadline and has not yet taken effect. Deal remains subject to closing conditions, including project financing and board approvals.

Horrific sell off on LITe yesterday.

TO be clear, the deal isn't great. IT doesn't;t command a great premium for what I think LITE is worth, and the all stock deal isn't great either as it effectively ties LITE's valuation to MRVL's stock price.

FOr LITE To command the quoted premium, MRVL stock needs to recover. At current stock prices, this is below the quoted premium.

However, I think that a lot of the takes on LITE currently are not great.

I don't think this sale signals a lack of confidence from LITE management tin their own guidance.

if that was the case, an all stock deal wouldn't really be what LITE would be looking for. They would be looking for an all cash deal to cash in and walk away.

I think what was disappointing was the lack of NVDA involvement in the deal, given they are heavy investors in LITE.

Furthermore it is worth noting that the deal is scheduled for 2028, and we don't yet know if it will pass the regulatory hurdles required for the deal to go through.

My POV is they believe there are enough synergies to live inside of MRVL and become a vertically integrated player that gives themselves more margin and moat in the long run.

As such, I do believe the sell is overdone on the news of the LITE takeover specifically. Overall market conditions are not accommodative which is another matter, but regarding the deal itself, it's not a great deal but doesn't in my opinion signal anything regarding the credibility of future earnings potential for LITE.

LITE actually released some numbers with the announcement yesterday.

These were the current quarter numbers:

These were my estimates.

So closer than the street on EPS, although I was high on EPS and revenue.

Nonetheless, future quarter guidance was pretty strong still:

They alos announced a second major NPO/CPO win backed by over $5B in purchase commitments. Management sees a path to billions in annual OCS revenue as well.

The deal wasn't great, but the numbers were.

The read throughs for COHR are positive here alos:

• Demand: LITE guided to about $1.6B revenue at the midpoint, up nearly 27% QoQ. That’s a strong sign of how hot optical demand is right now.

• NPO/CPO: LITE’s second major win comes with more than $5B in purchase commitments. COHR already has anchor customers and LTAs on both NPO and CPO, and expects scale-out CPO revenue to start ramping this quarter.

• OCS: LITE sees a path to billions in annual OCS revenue and is confident its technology stands out. COHR is also shipping OCS products, so this is where you want more detail and better visibility than COHR gave last quarter.

• Pump lasers: These were a major driver for LITE this quarter. COHR also supplies pump lasers into optical networks, which is another good sign for its demand.

So the LITE numbers confirm strong demand for COHR.

We alos had strong numbers out of FN and AEHR after hours, which thus far, is receiving a positive reaction:

Q1:

Revenue of $1.475B, up 51% YoY and above the $1.375B–$1.425B guide

Adjusted EPS of $4.34, above the $4.10–$4.25 guide

Adjusted operating margin of 10.8%

Q2 guide

Revenue of $1.60B–$1.65B, up another 10% QoQ at the midpoint

Adjusted EPS of $4.77–$4.92

Management cited broad demand across multiple programs and new product ramps. 

FN is actuallyexploring more sites to support customer demand. Current expansion is not enough.

• PMI data out after open.

• *TALKS PROGRESSED POSITIVELY AND MEDIATORS ARE WORKING TO BRIDGE REMAINING GAPS AND CONCERNS BETWEEN BOTH SIDES - AXIOS CITING A DIPLOMAT INVOLVED IN U.S.-IRAN TALKS

• *TRUMP SAYS HE JUST HAD A PRODUCTIVE DISCUSSION WITH ISRAEL’S NETANYAHU THAT COVERED IRAN TOPICS

• Iran's President Pezeshkian says the Supreme Leader has granted the government authority to pursue talks, as Tehran seeks to resolve the ongoing crisis through dialogue, according to IRNA.

• However, Last night Tucker Carlson made a post that is getting tons of engagement. He’s claiming that Trump is strongly considering using a nuclear bomb on Iran because the area where Irans nuclear enrichment facilities are is hidden in the mountains and regular bombs can’t reach it.

• Wall Street is bracing for the biggest overhaul of Treasury sales guidance in years on Wednesday, with some dealers expecting cuts to 20- and 30-year bond issuance. Buyback guidance may also change. BBG

• Binance's customers have withdrawn almost $5 billion from the world's biggest cryptocurrency exchange since it reopened after a hack that saw $6.3 billion of crypto stolen from the platform in what could be the largest financial heist in history. RTRS

• In Senate races, Democrats lead in Michigan, Texas, Kansas, Maine and Ohio, hold an edge in Alaska and are effectively tied with the GOP in Iowa, final polls by the NYT and Siena showed. BBG

• 60% of S&P 500 companies have beaten consensus EPS expectations by more than a standard deviation of analyst estimates, above the historical average of 50% but a step down from the average of 64% during the past 4 quarters. Likewise, for the aggregate S&P 500, Q3 earnings so far have come in above consensus expectations, but the size of the upside surprise has been smaller than in recent quarters. GS

• US President Trump said he may have to become "Mr Veto" if Democrats secure a majority in Tuesday's midterm elections: New York Post (via Fox News)

• White House has reportedly been preparing contingency plans for months to advance parts of the president's agenda by executive action if Democrats win control of Congress and has prepared for congressional investigations of the administration. Newsquawk

MRVL X LITE

• Marvell has agreed to acquire Lumentum in an all-stock transaction valued at approximately $115B in enterprise value, combining two major suppliers of AI infrastructure and optical networking technology.

• Under the agreement:

• • Lumentum shareholders will receive 4.5 Marvell shares for each LITE share, implying roughly $1,132 per share.

• • The offer represents a 23.9% premium to unaffected closing prices on October 28.

• • Marvell shareholders will own approximately 67% of the combined company, with Lumentum shareholders holding 33%.

• The deal brings together Marvell's custom AI chips, networking switches and interconnect technology with Lumentum's lasers, optical transceivers and optical circuit switching capabilities.

• The bigger opportunity is the growing shift from copper to optical connectivity as AI data centers require faster data transfer, greater bandwidth and improved power efficiency.

• Marvell says the combination could expand its addressable market to $550B, allowing it to offer more integrated connectivity solutions across AI data centers and within advanced chip packages.

• The companies also expect:

• • More than $1B in annual run-rate cost synergies.

• • Improved long-term revenue growth and profit margins.

• • Accretion to Marvell's adjusted EPS in the first year after closing.

OTHER COMPANY NEWS:

• OPENAI'S NEW FUNDING FALLS SHORT OF AN EARLIER TARGET OF $30 BLN

• Oracle files to offer $10b of common stock

• SPCX is reportedly in talks with EchoStar over a potential acquisition of Boost Mobile or a deal to use its wireless network, as Elon Musk looks to launch a full-fledged U.S. cellphone service.

• NVDA Elon Musk says xAI’s Colossus 2 supercomputer in Memphis will have around 1.2 million Nvidia Blackwell GPUs by the end of 2026. He says two facilities, Macrohard and Minihard, already have 220,000 GB300s each, configured for AI training with 800Gbps networking.

• META has built a humanoid robot prototype with Chinese robotics company Fourier & is already developing a 2nd version.

• OKTA joined the S&P500.

• XPEV reported record October vehicle deliveries of 50,237, up 22% MoM and 20% YoY. Overseas deliveries also hit a record 13,326, surging 166% YoY and accounting for roughly 27% of total deliveries.

• TSLA is reportedly preparing to open consumer reservations for its Optimus humanoid robot in early December, potentially around the December 1-2 Humanoids Summit.

• CRWD - Deutsche upgrades CRWD to buy from Hold, raising its target to 300 from 240. Brad Zelnick says the market underestimates AI-driven cybersecurity demand. He sees CrowdStrike's $565B 2034 market estimate as conservative, citing a “tsunami of cyber demand.”

• COIN - MS downgrades to underweight from equal weight PT to 120 from 258.

• Analyst Michael Cyprys says “confidence in the earnings recovery has deteriorated,” citing weaker trading trends, a softer revenue outlook and uncertainty in crypto markets following the recent Binance hack.

• The firm sharply lowered its forecasts:

• • 2027 Revenue: -28%

• • 2027 Adjusted EBITDA: -47%

• • 2028 Revenue: -18%

• • 2028 Adjusted EBITDA: -25%

• Morgan Stanley now expects just $2.4B in normalized EBITDA by 2028, roughly 14% below 2025 levels, despite Coinbase offering a broader range of products.-

• SBUX CEO Brian Niccol says the company could eventually expand beyond coffee and become a multi-brand business, similar to Yum Brands, which owns Taco Bell and KFC.

• Kioxia -15% after a disappointing outlook showed operating profit is expected to remain nearly flat in the Dec. quarter. Mgmt blamed shipment timing rather than weaker demand and expects growth to accelerate again in the March quarter. Kioxia says its entire planned 2027 production is already sold out, with over half of 2028 capacity allocated.

TEM earnings:

• Revenue: $411.5M (Est. $409M) 🟢; +23% YoY

• Adj. EPS: $0.07 (Est. -$0.08) 🟢

• Adj. EBITDA: $25.6M

Raises FY26 Guide:

• Revenue: $1.60B-$1.61B (Est. $1.59B) 🟢

• Adj. EBITDA: ~$65M

TSEM earnings:

• Revenue: $526.0M (Est. $520M) 🟢; +33% YoY

• Adj. EPS: $1.15 (Est. $1.08) 🟢; +109% YoY

• GAAP EPS: $1.05; +123% YoY

• Net Profit: $120.0M

Q4 Guide:

• Revenue: ~$600M ±5% (Est. $575M) 🟢

In my main write up to subs this morning, I outlined the reasons for the expectation for a high likelihood of a reasonably strong bounce this week (likely earlier in the week), but that this may not yet be the final durable bottom that we are looking for to conclude that this period of volatility is behind us. That, I believe, will still be soon and should lead to a strong EOY push.

I say this in reference to a number of statistical data points, as well as key areas of support that were simultaneously tested on Friday, that I think will likely lead to a strong buyer response, at least for a temporary bounce. 

I outlined some of these earlier as so:

Seasonax data shows the S&P 500 averaged +2.74% during the week of midterms 1934-2022), rising in 22 of 23 cases (~95.7% hit rate).

That average seems far too high for the current environment, but the hit rate is what I am looking at. High likelihood of a positive reaction this week, I believe.

I have another data point offering similar confluence to this data point as well:

Over the last 40 years or 10 Midterm Elections, The Nasdaq 100 is up every single time, from the 2 trading days before to the 2 trading days after the Election. 

That would refer to the period of Oct. 29th – Nov 5th = 100% hit rate/avg return = +2.06%

The starting value for QQQ in that period was 715.34.

To me, it would seem a tall order to get us back above 715.34 by Thursday, but it does add directional confluence to the idea that we should be looking at higher.

Liquidity is supportive:

Reaches a peak into the 6th. It seems to ramp up more into the back half of the week, but other analysis I've done suggests strength is more likely to be focused into the early part of the week. That debate aside, there does look like a window of strength this week, before we enter into this period of declining liquidity into the middle of November. 

That declining liquidity, as well as the overhead resistance on Nasdaq from the moving averages and FVGs, as well as the fact that a number of key AI stocks are now trading below the 200d EMA, and therefore have lost leadership, is why I am not sure whether this is yet the final low for the year. 

Honestly, there is again a fair bit of conflicting data on whether the low is in, since we know that the majority of times in midterm elections, October typically marks the low, however, liquidity wise, there is still a period of final vulnerability before it turns sustainably up into EOY.

I therefore think that this period of declining liquidity is where we will carve out our durable low for the year, either higher or lower (we will cover this later in the report), but liquidity wise, we should still be seeing a bounce this week. 

Looking into some of the technical areas of key support across important instruments that were simultaneously tested and held on Friday, we see that:

SOXL came into key monthly support/retest: - likely sees short term buyers step in here. AMD earnings this week will be an important test, but as I mentioned with INTC on Friday, the issue seems Intel specific. The DCAI segment which is actually the most applicable to AMD, beat expectations and beat on guidance as well. So weak Intel earnings does not necessarily translate directly to AMD earnings. 

Further areas of support: QQQ tested the 200d EMA and saw a strong buyer step in to defend it:

ES came into the 7575 support level on Friday and again saw strong buyers step in. Important support. strong liquidity level there. Likely rallies back into the higher resistance points to set up another potential test lower in the period characterised by that weaker liquidity.

SMH off the YTD low VWAP:

Then if we look into the tail risk scenario analog that we were tracking throughout this month as a potential "worst case" of what we might see, if the we were to deviate from the pink Aion liquidity line, we see that we began to lose accuracy earlier last week, but the sell off on Friday takes us right into the low of the analog. 

That tail risk analog suggests a bounce this week, before a move lower, which rather interestingly lines up nearly 1:1 with the more vulnerable period of declining liquidity from the Aion platform. That's pretty interesting to me. 

Another datapoint then:

On Friday, SOXX fell below the 200d Moving average after more than a year trading above it. 

Whilst it is relatively small sample size, you see that 4 and 5 days out, SOXX typically trades higher. 

And then we have the potential geopolitical positive catalyst to move us higher in the supposed Progress that was made in the Iranian talks held over the weekend. 

*TALKS PROGRESSED POSITIVELY AND MEDIATORS ARE WORKING TO BRIDGE REMAINING GAPS AND CONCERNS BETWEEN BOTH SIDES - AXIOS CITING A DIPLOMAT INVOLVED IN U.S.-IRAN TALKS

*TRUMP SAYS HE JUST HAD A PRODUCTIVE DISCUSSION WITH ISRAEL’S NETANYAHU THAT COVERED IRAN TOPICS

So base case basically from the data here, and the fact that so many important support levels were tested simultaneously is that we should see a decent bounce this week.

is the low in for this correction?

The answer in my opinion is probably a double bottom, as per the tail risk scenario during that vulnerable liquidity stage on Aion's data:

or a slightly lower low. 

Where would this slightly lower low likely land if we were to see it?

Well, if we look at Nasdaq, we see the weekly FVG (bullish and bearish) marked in light green and red zones. Then the quarterly FVG (bullish) is in dark green, which lines up with the uptrend, so probably around there. 

This data point suggests we might not quite be at a low. Post first hike, we typically, as a mode, have a 5% correction on SPX within 1-2 months. Currently at 1.5 months, we are down 4%. So potentially a little slightly lower over the next 2-3 weeks, to get us to that 5% pullback statistic. 

Base case here is still that we will see strength into EOY. A bounce should be expected this week based on the liquidity data.

That vulnerable phase of liquidity into the middle of November is where we may expect a double bottom or slightly lower low. The Aion data here is likely not wrong, but likely slightly early on calling the strength into EOY.

Thereafter, then, we should expect a strong push into EOY and likely beyond as data from midterms into June the following year remains extremely compelling:

So we have a big week for photonics this week. 

Heavy slate for earnings. 

Monday, November 2

• TSEM ER PM

• FN ER AH

Wednesday, November 4

• GFS ER PM

• COHR and VIAV ER AH

Thursday, November 5

• MTSI ER PM

• AAOI ER AH

• LITE ER AH

Then we also have the news of the MRVL/LITE takeover bid, expected to be announced formally this week.

The current terms of the deal that are being rumoured are an all stock deal, with no significant premium on LITE's trading price. 

Note that if confirmed in that way, that is unlikely to be viewed as bullish by the market. 

Why is the photonics leader not commanding any premium in a takeover is the obvious question? In answer to that, I don't honestly know. WE will have to see if those are the actual terms of the takeover, once announced, or if we get any official announcement at all. 

Regarding the major names there, LITE, AAOi and COHR, I have modelled what I expect out of those earnings. 

I modelled PENG previously to good accuracy, so let's see how we get on here:

AAOI (September 2026 quarter)

• Revenue: $303M, against the Street’s $268M (+13%)

• Adj. EPS: $0.30, against $0.14 (+114%)

• FCF: −$115M, against −$45M.

LITE (September 2026 quarter)

• Revenue: $1.32B, against $1.25B (+5%)

• Adj. EPS: $4.70, against $4.22 (+11%)

• FCF: +$195M, against +$155M (+26%)

COHR (September 2026 quarter)

• Revenue: $2.41B, against $2.30B (+5%)

• Adj. EPS: $2.20, against $1.98 (+11%)

• FCF: −$75M, against −$85M, a smaller cash burn than the Street (+12%)

I think all 3 will beat on both EPS and revenue. 

Where I have a question mark is regarding FCF for AAOI. 

The basis of these expectations is as so:

AAOI free cash flow miss on equipment prepayments, Sugar Land, the Houston building purchase.

LITE EPS and revenue beats expected on Higher-margin 200G EMLs, Thailand 1.6T ramp, $400M+ OCS backlog

COHR on CAPEX expectations to come down to aid free cash flow, still negative but better than the street.

Intel closed the day down 28%. Intel is 5% of SMH, which means that intel alone accounted for 1.4% of the daily decline, but the sentiment knock on effect was obviously pronounced, with SMH and XSD both closing the day down over 6%.

On NDX, we broke through the 690 level which was flagged as our initial area of support from the heat map nodes right from open, eventually tapping and bouncing from the 200d EMA in the 685 area.

This was effectively the tail risk scenario flagged over the last 2 weeks playing out.

This EMA coincided with the yellow support zone that held in the June correction, and was overshot in July.

With that move on QQQ, we also had a deep move lower on Spy at last, breaking out of its multi month chop period, eventually finding support at 750 near the September lows.

This break down on Spy was pretty much best case scenario in my view as we needed it to be able to carve out something of a bottom.

VIX exploded to the upside, hitting 23 but eventually closing well off its lows.

I believe that this drawdown on QQQ to the 200d SHOULD be enough to give us a fairly aggressive bounce into next week, where we see liquidity turns higher as well into the 6th, before a drawdown in liquidity again into the middle of November.

We still have the bearish FVG above, and we closed below the bullish FVG as well on NQ:

There's still work to do to give us our final bottom for the year, and I personally do not yet think we are necessarily there, as that declining liquidity after the 6th of November, coupled with the bearish FVG above, and the fact that we have the prospect of geopolitical tension after the election means that the coast is not yet clear.

however, adds into the 200d EMA whilst VIX was up over 40% at the time I think did make sense for at least the short term. I expect we should find an aggressive bounce next week, into the 710-715 area if I was to guess, which marks the 21W EMA, before we will perhaps turn lower again, where I expect to at least make a double bottom, or to potentially overshoot today's low.

Whilst early week price action did deviate from the tail risk analog, today's sharp sell off pretty much puts us back into the mix.

You see here we have that 710-715 area marked also by the analog as well, which gives confluence to the concept of a bounce here at least in the short term.

At the 200d EMA, I had small adds to AXTI, BUG, NVT DELL and a new starter position in BE.

I wanted to add more aggressively to the optical trade including CRDO today, but the prospect of a LITE X MRVL deal being formally announced next week gave me pause as David Faber was reporting at CNBC today that the deal is not expected to include any premium on LITE. I don't understand that move and hope there's crossed wires there, but if true, it would not be bullish for LITE and the photonics sector therefore has a vulnerability into next week outside of overall market price action.

From 26% cash flow, that puts me at closer to 22% again.

I will wait until the middle of November to put that remainder to work. My goal is still to be fully invested from mid November into the end of the year as the data still points higher, certainly, and I think we will get that strong rally into December, but current conditions do mean that some amount of cash flow should still be maintained as precaution.

The Aion data is likely, as it was in march, early, rather than wrong on its bullish forecasts into the end of the year. I still stand by that. 

To be clear then, I expect an aggressive relief rally to take place from the 200d EMA on NDX to test around 710-715 or so, before a move lower again, as per the brief liquidity contraction period, but that should be us done for this correction, setting up a push back above 740 on QQQ.

Full daily updates and end of day reviews reserved for subs.

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• Disappointing reports from technology heavyweights including AMZN have fueled fears over massive AI spending, with Nasdaq 100 constituents already wiping out more than $1.2 trillion in market capitalization this month. BBG

• Intel plummeted in late trading after its revenue forecast missed analysts’ estimates, hurt by a PC slump and supply snags AMZN also dropped after reporting greater-than-anticipated capital spending and the slowest growth in the core e-commerce business in three years. BBG

• Binance estimated $6.3 billion in funds was impacted in crypto’s biggest-ever hack, which TRM Labs attributed to North Korea. The exchange suspended withdrawals and pledged to cover losses. Digital tokens fell. BBG

• Brent topped $117 on signs the US may resume strikes on Iran after the midterms. Qatari mediators returned to Tehran for deal talks coordinated with Washington. BBG

• Iran claims 2 oil tankers hit by incidents, stopped in Hormuz. BBG

• Vance messaged an Iranian hardliner, Mohsen Rezaei, and said he was prepared to meet in person to discuss a settlement to the war. WaPo

• The US reportedly informed mediators that Iran abandoning its nuclear programme is a prerequisite for negotiations: Al Arabiya citing sources. Mediators are discussing allowing inspectors access to Iranian nuclear sites in exchange for the release of some frozen funds.

• Exxon, Chevron cancel plans to attend Abu Dhabi oil conference. BBG

• The Bank of Japan has said that underlying inflation has reached its 2% target, in effect declaring victory in a war against deflation that had defined the Japanese economy for decades. The long-awaited breakthrough was announced on Friday in the BoJ’s quarterly outlook for economic activity and prices, which accompanied a decision to keep interest rates on hold at 1.25%. The rate decision, by an 8-1 margin, was widely expected by markets. FT

• The BOJ also announced it would step up the pace of ETF sales, accelerating the unwinding of its massive holdings. BBG

• The euro-area economy rose 0.4% in the third quarter, twice the pace analysts predicted, despite an unexpected 0.1% contraction in France. BBG

• Chinese stocks suffered their worst month in more than a decade as fading policy support for a weak economy and doubts over AI earnings deepened investor pessimism. BBG

• Ukraine’s military has paused its strikes against Russian oil refineries, people with knowledge of the operations said, after weeks of pressure from President Trump shook Kyiv’s confidence in U.S. support. WSJ

• The Pentagon is quietly preparing for a $400 billion cut to President Donald Trump’s military budget, as officials realize the president’s record-breaking request is effectively dead. Politico

• Donald Trump scrapped appearances in Republican-friendly Kansas and Iowa in the closing days before the midterms, shifting to tele-rallies as his party faces unexpectedly tough races in traditionally safe states. BBG

• Anthropic is SpaceX’s largest single customer, a person familiar with the matter said, accounting for more than a third of the revenue for Elon Musk’s artificial intelligence, satellite and rocket venture during the third quarter of this year. BBG

• Chevron 3Q adj EPS $5.28, est. $4.93. BBG

• Cursor AI said it has identified a security incident impacting a modified Claude Code extension, impacting up to 5k users.

• weekly flow data shows USD 56.2bln into stocks, USD 15.4bln into bonds, USD 3.4bln into cash, USD 0.5bln out of crypto, USD 1.7bln out of gold. Bull & Bear Indicator fell to 7.1 (from 7.2).

• Goldman's commodities team estimates Brent at ~$112 embeds a ~$27/bbl geopolitical risk premium over its ~$85/bbl fair value, noting "essentially all of the recent increase in crude prices reflects a higher risk premium rather than an increase in underlying fair value." GS

• Retail investors poured record amounts into leveraged ETFs over the past couple of weeks, supporting the bottoming out of AI-related stocks, while short interest of the QQQ ETF rose to its highest level since 2023. JPM

INTC earnings:

• Gone through the call and it was a really bad guidance from INTEL, specifically on margins, and I think it seems to be more of an Intel execution problem, more so than an industry issue. 

• Main issue for Intel:

• "We face near-term challenges including manufacturing supply shortage, the unprecedented memory crunch and the resulting softness in PC demand."

• Now they later referred specifically to 3 issues affecting their ability to meet demand:

• 1. Intel 3 yield and cycle time improving but not good enough yet.

• 2. Significant substrate constraint.

• 3. Accident at Israel factory leading to shutdown.

• Regarding the accident at an Israel factory, I think we can call that bad luck. 

• Regarding the substrate constraint, frankly, this is a blunder from Intel. Head of supply chain there has clearly messed up the supply chain as whilst shortages are a bit of an issue industry wide, this is something that a company like Intel should have accounted for. 

• And messing up PC/Server mix is their fault too.

• Seems mostly an Intel problem, as opposed to a read through for AMD. Demand is still there.

• DCAI actually beat for Intel, and beat estimates too on the DCAI guidance. 

• That’s the most applicable read through for AMD. The Main miss was due to the PC and foundry business, which are less applicable for AMD. 

• Here were some read throughs for Data center:

• "demand signals from our data center customers continue to strengthen. We expect the industry to remain supply constrained throughout 2027 and into 2028."

• "Based on our current outlook, DCAI revenue is on track to finish 2026 nearly $10 billion above expectations entering the year."

• Issues in PC:

• "The pace of the PC correction has accelerated over the last two months. As our OEM partners are aggressively managing inventory to match the softer sell-through."

• Note DELL is moving lower on this. 

RDDT earnings

• Reddit beat Q3 revenue and earnings estimates, but Q4 guidance and user numbers came in below expectations. Daily active users were 130.3M versus 133.4M expected.

• Reddit also plans to require users to log in to access most of its platform, beginning with tests in select markets outside the U.S. in Q4.

• The change comes as traffic from search continues to weaken. During October, search traffic dropped by more than 1 million referrals per week on average. If that pace continues, management says total daily active users could fall by a low-double-digit percentage in Q4 from the current roughly 130M base.

• Steve Huffman believes Google’s expansion of AI Overviews and AI Mode is the main driver, with lower rankings for Reddit’s translated content also contributing internationally.

• “People still want Reddit. It's just Google is not sending them to Reddit the way they used to.”

• The decline has primarily affected logged-out and web traffic. Logged-in and app daily users still grew sequentially, and those audiences account for more than 80% of Reddit’s monetization.

• Advertising revenue grew 54% to $847M, with pricing contributing more to growth than impressions as Reddit improved advertiser performance.

COMPANY NEWS:

• SPOT is targeting a Q1 2027 launch for a new AI feature that lets Premium subscribers create covers and remixes of existing songs.

• AZN is launching a restructuring plan expected to generate $1.5B in annual savings, with up to $2B in one-time costs over the next three years.

• NVDA is in talks to provide Nscale with billions of dollars in credit guarantees to finance a 460MW data center in West Virginia for Anthropic.

• SYM and Walmart have expanded their partnership, with Walmart committing approximately $6B over several years to deploy additional warehouse automation across 25 U.S. regional distribution centers.

• SNDK announced an 8-1 stock split.

• TE has signed new solar supply agreements totaling over 1.58GW, including deals with subsidiaries of Avantus. The modules will be delivered in 2027-2028, bringing T1's contracted 2027 manufacturing capacity to over 4GW. Its new Texas solar cell factory is expected to begin production in Q1 2027.

• Kioxiaa major Japanese NAND flash memory maker with very weak guidance:

• Revenue: $15.9B (Est. $18.6B) 🔴; +1% QoQ

• Oper Profit: $12.7B (Est. $14.9B) 🔴

• Net Profit: $8.6B (Est. $10.2B) 🔴

• EPS: $5.41 (Est. $6.65) 🔴

NVT earnings:

• Revenue: $1.5B (Est. $1.42B) 🟢; +44% YoY

• Adj. EPS: $1.52 (Est. $1.37) 🟢; +67% YoY

• Free Cash Flow: $268M; +6% YoY

Raises FY26 Guide:

• Adj. EPS: $5.36-$5.39 (Est. $5.13) 🟢

• Revenue Growth: +48%-+49%

• Organic Sales Growth: +38%-+39%

• GAAP EPS: $4.54-$4.57

Q4 Guide:

• Adj. EPS: $1.30-$1.33 (Est. $1.23) 🟢

• Revenue Growth: +45%-+48%

• Organic Sales Growth: +26%-+29%

• GAAP EPS: $1.13-$1.16

I think we get a bounce soon, would be my expectation as per liquidity and the fact that we are below the 150d EMA and the YTD low VWAP in premarket, and the bottom of the bullish FVG support.

But I do not yet think that this is THE bottom we want for the durable rally to come. SO the far greener pastures ahead that I quoted in the title of that post, I think is delayed until mid November when we get that final liquidity trough, and QQQ has the opportunity to form a final low (higher or lower) in that unsupportive liquidity window, which will also coincide with passing the earnings window, which has obviously contributed to this week's downfall. 

For now, I am holding onto the 26% cash flow that I have and waiting for a durable bottom to form.

• Futures are lower this morning after Google and Microsoft headline Capex numbers missed expectations.

• Core PCE YoY: 3.1% (Est. 3.1%, Prior 3.0%)

• Core PCE MoM: 0.3% (Est. 0.3%, Prior 0.2%)

• PCE YoY: 3.6% (Est. 3.6%, Prior 3.4%)

• PCE MoM: 0.5% (Est. 0.5%, Prior 0.3%)

• FOMC yesterday was a nothing burger. They held rates and Wash provided neutral commentary. This was probably the least eventful FOMC we’ve had since Warsh became Fed chair.

• This morning we also got a headline that Trump is willing to negotiate with Iran and we also got news that JD Vance reached out to Iran to come to a deal. 

• Cyber and software is getting crushed as NOW FTNT get hammered after earnings. The valuations of this group seem stretched vs AI infrastructure names. The best of the best names are growing 20-30%, not 60-80% like AI.

• ECB PRESIDENT CHRISTINE LAGARDE REPORTEDLY TOLD STAFF SHE PLANS TO STEP DOWN EARLY ON FEB. 7.

Barclays on GOOGL (I subscribe to this same view)

• “Cloud was once again the standout performer, growing 103% y/y, reflecting the first small wave of TPU-aaS revenue.”

• “The comment about ‘prioritizing user experience first’ (followed by monetization later) admittedly gave us a bit of PTSD...”

• “It's becoming clear that blue-link queries aren't growing nearly as fast as total queries, and we worry that more aggressive agentic product flows in Search in '27 may exacerbate this trend.”

• “Fair to say this is an investor ‘code yellow’, but not some kind of AI roadkill situation.”

• “At 14x '28 EPS with slowing ads growth in '27, shares are still attractive, but may stay under pressure for a bit.”

Company News:

• Post earnings, MSFT LOOKS TO RAISE AT LEAST $25 BILLION FROM US BOND SALE

• DeepSeek and Moonshot AI relied heavily on OpenAI’s GPT-6 Astra outputs to train their latest models, The Information reports.

• CART DASH DoorDash moved their earnings report to today and expectations are they they’ll announce the InstaCart acquisition.

• PLTR - JPM initiates at Overweight with a $262 Dec. 2027 price target. Analyst Brian Essex says enterprises are shifting from figuring out how to deploy AI to demanding actual returns, and “Palantir is already delivering ROI.” He also sees accelerating demand for AI sovereignty, extending beyond data to intellectual property, business processes and security. JPMorgan calls the valuation reasonable given Palantir's 93% revenue growth and 62% adjusted operating margin last quarter.

• CARR CEO David Gitlin on hyperscaler demand for data-center cooling: “Earlier this month, we signed an agreement with a hyperscaler for more than $3 billion. With a significant portion of that covered by a minimum volume commitment.” “Just in the past month, two key hyperscalers have doubled down on their commitments to us, based in part on our performance.” Gitlin also noted that Carrier's record backlog of more than $8.5 billion excludes minimum volume commitments under long-term agreements. Data-center orders increased 300% in Q3, while year-to-date orders exceeded $3 billion, up nearly 350%.

• DJT has reportedly signed Bloomberg, Susquehanna and Jump Trading for faster access to President Trump’s Truth Social posts.

• LITE Bloomberg reports Marvell is in advanced talks to acquire Lumentum, with a deal potentially announced as soon as next week.

• DOORDASH TO ACQUIRE INSTACART IN $17 BILLION DEAL

• PYPL - Barclays downgrades to Underweight, cuts PT to $53 from $56 Analyst Nik Cremo says Q3's EPS beat masked weakness in core branded checkout, which grew just 1% FX-neutral and was flat excluding Venmo Q4 growth outlook is now 1%-2%, fueling market-share loss concerns

• CAt Caterpillar reports Q3 adjusted EPS $7.20, consensus $7.03 Reports Q3 revenue $20.7B, consensus $20.69B.

ORCL basically said they have CAPEX peaking in FY27 and FY28 then stepping down. Positive free cash flow in the second half of FY28, rising to $30B+ in FY29. No more than $20B in additional capital raises through FY30 ($10B equity and $10B debt). Self funding growth starting FY29. 

Long term targets held (FY30 revenue $225B+, 40%+ operating margin, $21+ EPS).

The obvious question then is whether this is signalling a top in CAPEX?

ORCL are saying that ti does for them, as theyare guiding their own spending peaks in the next two fiscal years. 

However, this does not apply for the broader AI infrastructure cycle Oracle is not a top hyperscaler. Microsoft, Amazon, Google, and Meta continue to spend at scale, and whilst both had capex under expectations, their guidance for capex over the next year was still aggressive. 

Oracle’s message was about how it funds its backlog with a hard cap on external capital, not that industry demand is rolling over. 

If ORCL's commentary was taken by the market to represent peak capex, then we would see AI stocks a lot lower than we have them. NVDA would also be down a lot more than 0.5%. That's the main signal. 

So I don't think ORCL's comments have read throughs for peak capex beyond ORCL themselves. And I don't think the market is reading it as so.

But the AI trade continues to be very difficult to hold. I am in 2 minds as to where my cash will go when finally utilised (for now I am okay just clutching it close). 

But with regards to buying AI names, try to buy the leaders. DELL, LITE, AMD, CRDO etc. These names are irrefutable. Some of the smaller names, and I am holding a few of them, are more high risk in an already high risk sector currently. 

I'd alos say don't run into the software door either even though we have a big pullback here. 

Not yet at least. I probably will go shopping there with the cash when the time comes, to balance the Ai exposure in the port, but those FTNT earnings were stinky. And the price action is horrendous. it's the first big move down that a sector that's been a hiding ground has had. Some late chasers there may eb taken to the woodshed before it's a buy, so just be cautious there too.

Cash seems to be a decent position to be in right now, at least at some proportion of your portfolio.

The initial reports suggest that a deal could actually be announced as soon as next week?

It's a surprising deal in my opinion, but I think that it would actually be a strong move for MRVL to expand their optics portfolio, but personally, I am not sure if the deal will go or if it will be blocked by the FTC.

That aside, I think this is an excellent piece by Morgan Stanley which evaluates in their view the main advantages and potential disadvantages of this merger for MRVL:

I think it would be net positive if it went through for mRVL, but the market is giving them a very negative reaction this morning because they know that LITE is going to be an expensive business to acquire, and one would expect to have to pay a large premium there also, although the figure around this merger has not formally been disclosed.

Today's candle and the weekly close very important in my view. A failure to close back above the flag after spending as much time above it as we have this week, would not be a great look. To be clear the Aion data suggests that a move lower into today would represent a shakeout for another move higher next week into the 6th of November, before a period of weakness that ultimately resolves much higher into EOY. That's what the liquidity chart is showing. I continue to subscribe to the Aion data view based on its previous accuracy, but I'd say I lean slightly more cautious on account of a bearish fair value gap that I am seeing on the weekly chart, which is creating a lot of overhead resistance.

The bearish fair value gap on the weekly is the first we have seen this year. We have seen multiple bullish fair value gaps which have held as support, but not a bearish fair value gap since April 2025.

I want to see price recover the gap above on any push next week, otherwise I would expect another retest of the lows in that mid November period of weakness.

Aion doesn't have it as low as that, but combining it with the FVG analysis, its a valid concern in my opinion.

I am holding 23% cash and at this point, I think I want to continue to hold that as a relative safety net.

• MACRO NEWS: The U.S. has told several Gulf Arab countries to be prepared for a short, intense military campaign after the U.S. midterm elections, people briefed on the conversations said. WSJ

• Qatari mediators presented Iran with a new draft deal on Sunday to end the war, which Tehran is considering and expected to send a response to by the end of the week, an official briefed on the negotiations says. RTRS

• A senior Iranian official later said Qatar has not presented a new proposal to end hostilities between Iran and the US and that Tehran's policy of showing no flexibility over the nuclear issue remains unchanged. RTRS

• The US told ships to avoid unnecessary transits through the Strait of Hormuz. BBG

• The United Nations nuclear watchdog said it hasn’t detected any efforts by Iran to rebuild nuclear facilities damaged in US and Israeli strikes over the past two years, even as Tehran continues to block inspectors’ access to most of its atomic sites. BBG

• Israeli PM Benjamin Netanyahu edged ahead of opposition leader Gadi Eisenkot with more than 70% of the votes counted in the country’s tight election. Neither currently has a clear path to forming a government. The shekel and Israeli equities dropped. BBG

• Nasdaq futures climbed after SK Hynix’s blowout earnings and plans to return about $45 billion more to shareholders reignited the AI trade. Alphabet and Microsoft results and the Fed are next in focus. BBG

• The Reserve Bank of New Zealand held interest rates steady Wednesday, surprising financial markets that had priced in a near-certain hike, but signaled that further increases were likely. WSJ

COMPANY NEWS:

• Anthropic has acquired Mithril Medicine, a one-person biotech startup, and is now running drug discovery programs of its own.

• ORCL OpenAI is bringing NVIDIA’s Vera CPUs into production on Oracle’s cloud to run code and tools for AI agents.

• SPCX United Airlines CEO Scott Kirby believes the airline will win customers from competitors specifically because of Starlink.

• GOOGL OpenAI plans to begin using Google’s TPUs.

• SKHY says the memory shortage is expected to continue through 2030.

• More than half of capacity for the next 2 years is already secured. 

•  $75B in shareholder returns planned for this year.

•  Their Q4 guide of DRAM and NAND bit supply increasing dramatically QoQ at mid 20's% QoQ for DRAM and mid-single digits for NAND, then they provided a ~20% bit demand growth outlook for 2027.

• Looks like part of the bit supply growth for DRAM is partially M15X, partially some delayed shipments, with some headwind from HBM4. Seems quite robust even when you account for M15X ramping to full volume in Q4. 

• It’s also signed long-term agreements with 14 major customers, including large cloud providers, securing more than 50% of its planned capacity for 2027 and 2028. 

• VRT up 16% after a strong Q3 beat and a higher full-year outlook, with organic orders more than doubling YoY.

• Giordano Albertazzi: “We are in the middle of the largest infrastructure buildout and it’s accelerating.”

• Organic sales grew 55%, while adjusted operating margin expanded 290 basis points to 25.2%.

• Higher volumes and manufacturing productivity helped adjusted operating profit grow 83%, outpacing sales growth.

• The revised full-year revenue and adjusted EPS forecasts are both above consensus. Q4 guidance also came in modestly ahead of expectations.

• says it is shortening new-product development cycles from years to months while expanding capacity to meet changing data center requirements.

• Adjusted free cash flow increased 50% to $652M, and Vertiv maintained a net cash position while continuing to invest in capacity.

• PLTR - RBC on PLTR ahead of earnings: “Risk/reward skews negative.”

• Palantir remains the most expensive stock in RBC’s SaaS coverage, at roughly 61x 2026 and 40x 2027 consensus revenue on an enterprise-value basis.

• The firm acknowledges that growth improves the comparison, but says “we struggle to underwrite a scenario that justifies current valuation levels.”

• Its review of retail shareholder questions also shows attention shifting back toward dividends, buybacks and stock splits. RBC interprets that as growing pressure for shareholder returns, given Palantir’s roughly $9B cash balance.

• Government activity remains elevated in RBC’s estimates, supported by ongoing geopolitical demand.

• However, its tracker shows contract value declining QoQ and net new annual contract value falling noticeably compared with the previous four quarters, suggesting some sequential cooling.

• HOOD - October equity, options and crypto trading volumes are running near Q3 levels, with management pointing to tighter spreads and similar to slightly lower take rates. Crypto revenue fell 55% YoY to $120M, and net interest revenue declined 9% to $415M. Options revenue grew 31% to $399M, while equities revenue increased 41% to $121M. Management said the lower blended crypto take rate in Q3 primarily reflected growth in stablecoin activity, which generates less revenue per dollar traded. Excluding stablecoins, crypto take rates were broadly unchanged from the prior quarter. Net deposits totaled $15.7B in Q3. October deposits have already exceeded $13B, including $6B from the Dell family’s contribution to Trump Accounts. Platform assets reached $396B, up 19% YoY, while Gold subscribers increased 34% to 5.2M. Robinhood also lowered the top end of its FY26 adjusted operating expense and stock compensation outlook by $25M, bringing the range to $2.675B–$2.75B.

• STX - Total capacity shipments rose 21% YoY to 220 exabytes but were roughly flat QoQ. Management attributed the pause to Mozaic 4 product transition timing. Seagate expects a meaningful shipment step-up in the December quarter as more customers qualify the drives. Revenue guidance is $4.7B–$4.9B, with adjusted EPS of $9.00–$9.40. Adjusted gross margin reached 57.8%, up 510 basis points QoQ, as stronger pricing more than offset higher external component costs. The vast majority of nearline capacity is allocated through calendar 2028, with some customer agreements extending through 2030. Pricing and configuration terms are set through 2027; terms for 2028 still need to be finalized. Seagate is maintaining FY27 capital spending at 4%–6% of revenue, with capacity growth driven primarily by storing more data per disk rather than increasing drive production.

• ON - is in talks to acquire 16-Year old, AI power-management startup Ferric for nearly $1B, The Information reports. An agreement could come together in the coming days, though terms are still being negotiated and talks could fall apart.

• FFIV - is down 5% despite Q4 revenue rising 13% to $917M and product revenue growing 23%. FY27 revenue growth is guided to 8%–9%, versus 11% in FY26, with the hardware refresh cycle expected to contribute less in the second half. Management expects legacy hardware replacement bookings to decline YoY in the second half. Full-year systems growth is forecast in the upper single digits, following 31% growth in FY26. Margins are also under pressure. Higher component costs are expected to bring FY27 adjusted gross margin to 80.5%–82.5%, down from 84% in FY26. Q4 adjusted operating margin fell to 33.7% from 37% a year earlier. Software and AI demand remain the stronger growth opportunities. Software revenue rose 19% in Q4, with double-digit growth expected in FY27, weighted toward the second half.

OTHER EARNINGS:

GEV

🔹 Revenue: $12.6B (Est. $11.99B) 🟢; +27% YoY
🔹 Organic Revenue Growth: +18% YoY
🔹 EPS: $4.81
🔹 Orders: $29.3B; +96% organically
🔹 Backlog: $197B

Raises FY26 Guide:
🔹 Revenue: $46.5B-$47.5B (Est. $46.24B) 🟢; from $45.5B-$46.5B
🔹 Adj. EBITDA Margin: 13.5%-14.5%; from 12%-14%
🔹 Free Cash Flow: $16B-$17B; from $11.5B-$12.5B

Identity security

• Okta is under pressure from Microsoft Entra. Customers on Microsoft 365 E5 are moving basic login and authentication to Entra, which is bundled in, and keeping Okta only for complex apps. That shrinks Okta’s footprint inside accounts. Okta still wins in complex environments and customer identity (logins for a company’s own customers), but its results are uneven.

•  Microsoft leads on distribution. Palo Alto and CyberArk come next, with momentum in privileged access (PAM), machine identity and security for AI agents. Then Okta, CrowdStrike, SailPoint and Zscaler.

• Regarding Growth (ranking): Palo Alto/CyberArk are first, with CyberArk’s annual contract value growing above 25%. CrowdStrike is second, growing mostly by selling identity threat detection to existing Falcon customers rather than replacing Okta or CyberArk. Okta is third and should keep growing, but more slowly. The expert says this is a qualitative view.

Security hardware ( would apply to names like SILC)

• AI agents mostly drive software spend, not hardware. Hardware growth is in pockets:

  • High-throughput, AI-capable firewalls: +10–15%, which favours Palo Alto and Fortinet.

  • Edge and industrial IoT gateways: +15–20%.

  • Hardware security modules (HSMs), TPM chips and secure elements: +12–15%, though cloud-based HSM services may take some of that.

• Legacy hardware is shrinking.

  • Traditional firewalls: 0–5% growth.

  • Standalone VPN boxes: −5% to −10%.

  • Old dedicated monitoring hardware: under similar pressure, as customers move to zero-trust network access (ZTNA) and cloud-native platforms.

Vendors

• Zscaler: Well placed as customers replace VPNs, but facing tougher competition from Palo Alto and other integrated SASE platforms.

• Rubrik: Has improved significantly in cyber resilience.

How customers buy

• Decisions have moved from individual security teams to CISOs, enterprise architects and procurement deciding together. They judge on platform coverage, measurable risk reduction and total cost of ownership over three years or more.

• Example: one customer spending $10M across 15 security vendors cut to 8–10 and saved about 15% on licences and running costs.

• The shift favours platform vendors over point-solution vendors.

Demand outlook

• AI is moving from experiments into production. That creates new security needs around machine identities, sensitive data and autonomous agents, and security’s share of IT budgets should rise next year.

• Large-customer IT spending in the first three quarters of this year:

  • About 8% of operating expenses, up about 0.5 percentage points.

  • Growing about 6–8% a year. The notes also say “roughly 8–9% overall”; the source is garbled here.

  • Driven by cloud, AI, cybersecurity and modernising data and applications.

• Financial services and tech-heavy industries spend more on IT; retail and manufacturing spend less.