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Stocks continue to fall, including Coreweave, which fell 5% before the start of trading tomorrow. The Nasdaq is now showing a drop at the opening of another 1%. Well, I want to talk about this. I want to talk about credit spreads, okay? Credit spreads are widening, and this graph, in my opinion, is the most worrying thing we have in the markets right now .
Now I'm also going to show you about a 5- minute clip from Fundstrat that Tom Lee and Fundstrat have published in the last 12 hours. I think you'll get some perspective, because Tom Lee is apparently still optimistic about AI, while people are panicking about it. We'll talk about that too. Ladies and gentlemen, we have many topics to discuss.
Let's start with what Tom Lee just said. the scale of today. How do you think this fits into the cycle? Yes. I really want to offer some perspective because I've been following the markets for 34 years. Actually, 36 years old. I'm not sure. A long time. More than a generation. And most of my time I worked with institutional investors, that is, fund managers, professional asset managers.
You have to remember that the average age of a fund manager is probably 35 years old. So, this means that this manager probably came into the business in 2016 . Of course? So they have only seen the light since 2016. And by the way, in 2016, the fund manager started his work in 2006. This means that if someone has 10 years of experience, their review does not cover other bubbles.
For example, the average manager today did not manage money during the 2008 global financial crisis, as he did during the dot-com bubble. Whereas I covered the markets throughout this entire period of time. If you think there 's an AI bubble today, okay? First of all, this is a common opinion. I've never seen a bubble where everyone thinks it's a bubble.
Okay, think about that for a minute. If you all think it's a bubble, then you're likely not going to push things to create one because everyone thinks so. And I think that's why when I look at AI, we just need to make some measurements. ChatGPT was launched in 2023. So, we're already 3 years into innovation that comes from artificial or superintelligence.
The public internet was launched, essentially, in 1994, okay? And at the same time, mobile networks were being built . Total costs for developing the Internet, mobile communications, and gadgets in 2026 prices amounted to about 35 trillion. AI infrastructure spending is around 30 trillion. So it costs about the same .
That's the thing. Cisco only peaked in 2000, okay? And between 1993 and 2000, Cisco shares fell by 50% twice. So, you were on the verge of total collapse twice. And I think we're actually in 1997 now. I believe we are still very far from the "bubble". At the same time , it's worth remembering one more thing: wireless communication has evolved along an S-shaped curve.
It has grown exponentially for 25 years. Stocks peaked 10 years after the cycle began. So I think the AI cycle, even if it lasts 25 years, will reach a "bubble" around 2033. "Bubble" peak. So, Tom Lee says that the AI "bubble" hasn't burst yet, or we're not even close to it yet. He suggests that we have another 7 years ahead of us.
Ultimately, no one knows for sure the correct answer . I'm of the opinion that we probably won't have some epic bubble burst like in 2000 . I believe that certain stocks will show good results. Some stocks will go through periods where they are not successful. We will have volatility. We will have, you know, moments of panic.
And we are in one of them now. We are at another such moment. CoreWeave fell 15% today, and another 5% during overnight trading. And this is what you might call a moment of panic. I assume most of you know what happened today with CoreWeave. But essentially, a DA Davidson analyst came out and said, " Listen, CoreWeave could go bankrupt." Shareholders can lose everything, essentially, right?
Gartner stated that by 2030, which is not that far away, 80% of neo-cloud providers may go bankrupt or cease independent operations. Essentially, you will lose everything in 80% of these neo-cloud providers. CoreWeave's CEO says the company is confident in its financing, sales and order backlog. It's never a good sign when a CEO comes out and says, " Listen, you don't have to worry about us." But it's obvious that people are worried about them, right?
Elon Musk said today, "It's hard to build supercomputer clusters." Even they have difficulty with this , and they are the best at it . This seems to hint that perhaps there are some problems with CoreWeave. Elon is a very connected person to the industry. So people think, " Okay, if Elon actually says CoreWeave has a problem, then they have one." We just don't have all the details.
The bond market has been reacting to this for quite some time. Actually, this is not news. Across the entire AI trading landscape, CDS are expanding. They are growing. It doesn't matter what you're looking at. You can look at Meta. You can do it on Nvidia, Amazon, Microsoft, the entire company . Microsoft—they're the best .
Markets today say that Microsoft has the lowest risk of default. Okay, great. Class. But they are all growing. Spreads are higher everywhere, or CDS themselves are much higher today than they were a few months ago. And in fact, the problems in the bond market did not arise yesterday. Elon Musk and Chamat's comments today only drew attention to the situation, but CoreWeave bonds have been rising from 9% to 15% over the past 3 months.
They are constantly growing. So, the bond market has been experiencing this problem for a long time. Jefferies also reported today that this is a record volume of put options trading for CoreWeave. You've never seen anything like it before. Today, 772,000 put options were purchased for CoreWeave. It's kind of like a reverse short squeeze, right?
We've been talking about this in the bond market for a long time. These reverse short squeezes that happened in the bond market, where people would go out and, you know, take short positions in bonds. This forced other firms to hedge their positions, effectively opening short positions in the bonds.
This led to a price drop, which triggered further hedging and new short positions. I think this is basically what happens with CoreWeave. But as I said in the previous video, I think the bigger problem is not CoreWeave, but private lending. If AI trading were funded solely by free cash flow, I don't think we would have a problem.
The G7's free cash flow is strong. They are all well. But that's only about $700 billion . It is projected that we will spend over a trillion dollars over the next 12 months on capital expenditures. This difference is financed by private lending. If private lending starts to evaporate with the words, "Hey, look, there's too much risk here." " Something's going on.
" "We don't want to get involved in this." "What will happen?" They will back down and you will start to miss capital expenditure plans. I mean, AI stocks are falling even if they are outperforming . What do you think will happen if in 6 months they start not fulfilling their predictions? Although I don't think that will happen.
I believe this is a moment of panic. But, I mean, it comes at a not-so- good time, like today. The consumer price index turned out to be higher than expected. And these next two things are the most disturbing part of this. The yield on 10-year Treasury bonds fell four basis points in overnight trading.
Of course? CPI came in 35% higher than expected today. Ha? Theoretically, you should see Treasury yields rise because of this. No, they fall. This means that investors are now genuinely scared. Here's what it means. So, if bond yields fall on a day when CPI is high, that's a bad sign. You also have junk bonds, credit spreads, yeah, they look really bad, you know?
You are back to the highs of 2022. And a lot of this has happened in the last month. I mean , look at this graph, okay? Basically, this means that the higher the blue line, the more fear. Historically, markets are supposed to fall. Whenever you see a sharp rise in credit spreads, you tend to see a pretty sharp drop in stocks.
This is basically what it shows you. We haven't seen a sharp decline in stocks yet. We saw a rapid increase in spreads on junk loans . Of course? Now I would argue that you have already seen the average stock fall, right? So I talked about this in the last video, but if the average stock in the S&P is in a bear market, and now we have this bad news for AI.
Can you see a sharp drop in the markets? You can. I'm not going to claim that this will happen. I don't know what will happen. This is not a guarantee, certainly not a recommendation to buy, sell, or trade anything . But the only area that supported the markets, namely AI, hardware and the “magic seven”, are now taking a hit.
The good news is that we have TSMC reports tomorrow morning. That will be a big catalyst, and we also have the reports from the Magic Seven and AI companies that will start in the next few weeks, and I think we will have some good reports, and that may slow things down a little bit , but what happens next?
What will happen next? We'll have to wait and see. In our trading community portfolio, I have repeatedly emphasized: in the current environment, it is not worth having a large leverage. In other words, don't take excessive risks in anticipation of growth . I also don't think you need to have a lot of options or short positions in your portfolio.
I understand that if the markets collapse, this is obviously the right strategy, but in these market conditions, things can change quickly. And you definitely don't want to find yourself in a situation where you suffer losses. We have a year-to-date return of over 100% in our trading community's portfolio.
of today's episode. This is not a financial recommendation. I am not a financial advisor. I think the best way to hedge sometimes is not to hedge at all, but to simply buy assets on a drawdown if one occurs. Because, again, I don't think this is the moment when the bubble burst. I really think there's been a lot of fear in the market over the last few days .
I think AI stocks are clearly taking a serious hit right now. But the technology itself is extremely valuable, creating huge added value and productivity. Market leaders will change over time. There will be moments of panic, but ultimately, I believe the real winners in AI will be applied solutions.
These are companies that sell AI-based products. And not necessarily the companies that run the data centers that power AI. Again, I don't want to buy more shares of equipment manufacturers on a dip. I have long disliked the shares of AI equipment manufacturers. Unless they become very cheap when the index probably drops by 30–40 percent.
If that were to happen and some of these stocks hit my buy target levels, then I would be interested in them, but I just think buying stocks in AI software, cybersecurity, automation, robotics, or even just good companies that you like on a dip is much more sensible. I think 2027 will be a successful year unless we face an epic bankruptcy or a large-scale problem that causes a domino effect, although that is impossible to predict right now.
I don't think that will happen. I just think this is a moment of panic. And provided that the war with Iran ends. If a war with Iran starts in 2–3 weeks, imagine how difficult the situation could become, right? So, while I don't have all the answers, we're all trying to navigate this situation as best we can.
I like the idea of buying on a dip. I personally will buy on the dip. I don't want to be too vulnerable to one side. I don't want to , you know, short this market too much. I also don't want to be overly exposed to leverage in this market on the upside. You also had Anthropic after the close of trading, which told investors that Q3 revenue reached 16.8 billion, and they came out on adjusted profitability.
The markets didn't care. IPO marketing could begin as early as November 9, allowing trading to begin by Thanksgiving. They are trying to rush this IPO. I think this is a farce. I think Anthropic is only worth a fraction of the valuation they're trying to get , you know? Anthropic is being priced as if they're some kind of, you know, massive market disruptor.
No, big language models are just a commodity. Although I don't think the sell-off at the Anthropic IPO will have any significant impact on markets globally . When they go public, the big investors will get paid, the private loans will be repaid, I think everything will be fine. I think it's those who buy shares at the IPO who will really suffer the most.
And the markets will feel completely normal after that. The big problem when you're dealing with private lending again and these cyclical deals is the idea that they could backfire, and that would make AI trading vulnerable 6, 12, 18 months down the road. It's not that private lending will collapse today .
It's the idea that maybe it will slow down in the future. And then, how to simulate Nvidia performance? How to simulate AMD performance? How to model Oracle or Microsoft metrics? This becomes very difficult to do, and it creates uncertainty. And that is literally happening right now. But, again, I think it's just a little bit of fear.
We've seen moments like this before. They can come and go quite quickly. If nothing happens tomorrow or the day after tomorrow , the core still exists, they are still doing well. You know, don't be surprised if AI trading just calms down a bit. Again , the biggest problem, in my opinion, is the spreads on junk bonds.
This is a big alarm bell . But, again , you've already seen the markets collapse. How far should AI stocks fall? I don't have an answer to that. So let us of today's video below. If you want to get $50 for free from Kalshi, the link is in the description of today's video below. And if you want to trade and invest with us, again, the link is in the description of today's video . Have a great day, see you in the next issue.
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