To The Moon

The market: technology shares, oil and Treasuries pointed in three directions

The $NASDAQ(.IXIC)$ fell 2.60 per cent to 26,009 on Thursday, the $Invesco QQQ(QQQ)$ lost 2.86 per cent to US$704.47, and the $S&P 500(.SPX)$ declined 1.21 per cent to 7,663.43. Technology carried most of the damage: $Meta Platforms, Inc.(META)$ fell 6.98 per cent, $NVIDIA(NVDA)$ 4.40 per cent, $Advanced Micro Devices(AMD)$ 8.10 per cent, $CoreWeave, Inc.(CRWV)$ 10.06 per cent and $NEBIUS(NBIS)$ 7.23 per cent.

On the same day, WTI crude rose 2.91 per cent to US$99.98 after briefly crossing US$100, while the ten-year US Treasury yield fell by more than 17 basis points to roughly 4.972 per cent. The $iShares 7-10 Year Treasury Bond ETF(IEF)$ gained 1.08 per cent and the $iShares 20+ Year Treasury Bond ETF(TLT)$ rose 1.87 per cent. Oil usually lifts inflation expectations, while Treasury buying pushes yields down. Their simultaneous rise shows that investors were pricing more than one risk.

The AI sell-off: demand did not vanish, but external funding became more expensive

The common thread was not the sudden disappearance of orders. Investors were recalculating how much cash, debt and future funding would be needed to support large capital-expenditure plans. Meta's quarterly revenue and advertising growth remained strong, but capital expenditure exceeded operating cash flow and free cash flow was negative at US$2.12 billion. Its 6.98 per cent decline on Thursday shows that the market dealt first with the gap between spending and cash returns rather than focusing on revenue growth alone.

The pressure was more severe among companies that cannot yet fund expansion entirely from internal cash. CoreWeave fell 10.06 per cent and Nebius lost 7.23 per cent, with CoreWeave also hit by a target-price cut and financing concerns. Chip shares were reduced across the group: AMD fell 8.10 per cent, SanDisk 8.51 per cent, Intel 8.04 per cent, SK hynix 8.07 per cent and Micron 6.26 per cent. The move did not say that AI demand had gone to zero. It said valuations now have to answer a stricter question: will the next expansion be paid for by customer cash flow or by another visit to capital markets?

Why did long bonds rally when oil crossed US$100?

Higher oil raises near-term inflation risk and increases energy costs for transport, manufacturing and data centres. If oil stays elevated, the Federal Reserve has less room to ease quickly, while long-duration assets face a higher discount rate. On that line alone, long bonds should not be the comfortable trade.

The bond market was following a second line. As technology shares fell sharply and concerns about AI financing grew, investors moved into Treasuries for protection and marked down future growth. Yields can continue falling alongside higher oil when demand for safety and concern about growth and credit outweigh the inflation effect. TLT's larger gain than IEF is consistent with longer-duration bonds being more sensitive to lower yields. The reverse matters too: if oil keeps climbing, TLT is more exposed to renewed inflation and a rebound in rates. IEF offers less upside when yields fall, but its shorter duration makes the opposite move easier to manage.

Defensive shares rose: money did not simply leave the market

The other side of Thursday's session was broad strength in consumer, defensive and cash-rich companies. Procter & Gamble gained 5.58 per cent, $Coca-Cola(KO)$ 2.87 per cent, $Wal-Mart(WMT)$ 2.82 per cent, $Costco(COST)$ 1.99 per cent, Eli Lilly 2.83 per cent and Berkshire Hathaway's Class B shares 1.32 per cent. These businesses are not taking part in the AI infrastructure spending race, and their earnings and cash flow depend less on the next funding round.

Those gains turn the session from an indiscriminate risk-off move into a rotation. Investors were still willing to own equities, but they demanded steadier demand, clearer profits and less financing risk. AI companies must show that heavy investment can become cash. Defensive companies need to show that an economic slowdown will not erode existing cash generation too quickly. The burden of proof is now different for the two groups.

The earnings test: a growth headline no longer guarantees a higher share price

$Bloom Energy Corp(BE)$ reported record third-quarter revenue of US$1.2358 billion and raised its financial-year guidance, yet the shares fell 8.70 per cent. The reaction reinforced the session's central point: when rates, energy costs and funding conditions are all moving, investors keep asking how much capital growth requires and how much cash ultimately remains. Company guidance is not the same as signed orders, nor does it guarantee that future revenue will arrive at the same pace.

$Moderna, Inc.(MRNA)$ fell 17.57 per cent after reports of leaked melanoma-vaccine data. That company-specific event amplified its decline, but it cannot explain the combined moves across technology, bonds, oil and defensive shares. Three tests now matter: whether oil can settle below US$100, whether the bond rally can survive inflation pressure, and whether AI infrastructure companies can show through earnings that cash returns are catching up with capital expenditure. Results from Western Digital and Nebius, followed by Alphabet, Microsoft and Amazon next week, will put numbers against those tests.

Thursday's market did not make a binary choice between inflation and recession. Oil traded the immediate supply and inflation shock. Treasuries traded future growth and credit stress. Within equities, investors distinguished between companies that can finance themselves and those that need capital markets to remain accommodating. The more useful dividing line is no longer simply technology against defensives. It is repeated funding needs against the ability to keep operating and buying back shares when funding becomes expensive.

This is personal analysis and not investment advice.

💬 【Talking Point】

What would reverse the defensive rotation first: cheaper funding, lower oil or stronger cash generation from AI companies?

💰 【Bounty】

Drop your view and reasoning in the comments and there are Tiger Coins in it for you! 🎁

🔔 Better shared than saved — tag a friend and split the coins!