The AI Trade Comes Under Pressure

0:00Welcome to RiskRversals Market Matrix, your AI-generated podcast curated by Guy Adami and Dan Nathan, breaking down the day's most impactful stock market and business headlines. All of today's market data is provided by FACSET. As a reminder, be sure to subscribe to RiskRversals Daily Markets newsletter. That's at riskreversal.substac.com. I'm Alex. And I'm Brunson. Now to the news. It's Thursday, October 8th. Today had a bit of everything. From geopolitical news impacting energy markets to major turbulence in the artificial intelligence trade, and debate around upcoming FOMC moves. Let's dive into it. Oil spiked higher, following reports that the US is preparing for major bombing operations across the Persian Gulf region. However, prices trimmed those early highs after it was implied that no military strikes on Iran would occur before next month's midterm elections. Throwing even more cold water on risk sentiment, federal reserve governor Christopher Waller

1:00signaled that the central bank may not be done tightening. Explicitly noting that additional interest rate hikes could be required to tame persistent inflation. That geopolitical anxiety was matched by pressure on big tech. A report from the Financial Times revealed that open AI's annualized revenue is trailing roughly $20 billion dollars below figures previously signaled. That revenue gap sent shockwaves across the ecosystem. Oracle dropped over 5 percent, while semiconductor heavyweights like Nvidia and advanced micro devices retreated 3 percent and 4 percent respectively. Looking at the stock market action of late, Verens published a commentary today. Noting that while headline indexes like the S&P 500 may appear relatively stable on the surface, the picture under the hood is much more fragile. Market breadth has narrowed significantly. With an increasing number of underlying stocks, falling below their 50-day moving averages, while index gains remain heavily reliant on a small handful of mega-cap leaders. While open AI's top-line growth may be missing some ultra-bullish

2:01forecasts, the competitive battle with rivals like Anthropic is only heating up. According to the Wall Street Journal, an aggressive AI price war is intensifying as developers race to capture market share, with open AI aggressively slashing API pricing and expanding promotional tiers to outpace Anthropic. At the same time, the information reports that open AI's newest models continue to score major technical wins, recently beating competitive benchmarks in advanced mathematical reasoning and enterprise logic tasks. It shows that while margins might be squeezed by the price war, the technological leapfrog game is far from over. In IPO news, Bloomberg reports that Nvidia Back to Data Center operator FurMisgrid is preparing to postpone its high-profile initial public offering after pushback from investors over valuation terms. Rather than proceeding with the public listing amidst tough market conditions, FurMisgrid is now weighing a private funding round to secure operational capital for its ongoing expansion. It's a striking example of how public market investors are demanding much cleaner balance sheets and lower multiples before absorbing AI

3:06infrastructure deals. That brings us to our deep dive today, where the Wall Street Journal and the Financial Times take a hard look at how rising interest rates are quietly eroding the valuation of even the most dominant technology giants. For years, ultra-low interest rates allowed big tech to trade at historic earnings multiples, as future earnings discounted back to present value yielded sky-high stock valuations. But with 10-year treasury yields remaining elevated, alongside persistent inflation, that mathematical equation has fundamentally shifted. Investors are now applying significantly higher discount rates to long-dated cash flows, shrinking terminal value calculations, and forcing a sharp repricing across growth heavy indexes. And what makes this cycle uniquely complex is the massive capital expenditure burden attached to the generative AI arms race. Tech companies are spending tens of billions of dollars constructing power-hungry data centers, purchasing specialized chips, and securing energy grid access. All financed at significantly higher borrowing costs than a few years ago.

4:08When corporate debt yields rise while revenue timelines stretch further into the future, return on invested capital naturally takes a hit. Both the Wall Street Journal and Financial Times emphasize that institutional investors are transitioning from rewarding aggressive cap-ex spending to demanding strict capital discipline. Moving overseas, a new Financial Times report highlights how Beijing is aggressively scaling up data center construction across remote energy-rich provinces like Inner Mongolia and Guijou under its National Eastern Data Western Computing Initiative. The playbook here is straightforward. Shift-power-hungry model training at West, where electricity is 30% to 60% cheaper than in the US or Europe, while keeping latency-sensitive applications close to major metropolitan hubs. While the US holds the lead in cutting-edge GPU hardware, American tech firms are hitting real power grid bottlenecks and rising energy costs. China is leveraging its cheap power and rapid civil construction to close that gap. Finally, over-indigital assets, cryptocurrency markets are

5:12facing renewed pressure. According to reporting from Yahoo Finance, a leading Ethereum core researcher warned crypto investors to enter bunker mode, citing tightening global liquidity, regulatory headwinds, and potential macroeconomic contagion risks. The cautious warning sent minor shockwaves through decentralized finance tokens, as traders brace for continued macro volatility across risk assets. Looking ahead to tomorrow, Delta Airlines reports before the open, with the University of Michigan Consumer Sentiment Number at 10am Eastern. That's your risk-reversal market matrix. Be sure to follow us to get alerts on new episodes every day. All of the articles mentioned on today's podcast can be found in the show description for Guy Adami and Dan Nathan's market analysis on these topics and more. Watch Market Call on Risk Reversals YouTube channel. Special thanks to our data provider, FactSet for supporting our coverage.