AI Trade Turnaround!
The artificial intelligence trade is back in vogue overnight. Let’s find out why. Also, let’s look at the rate-hike chatter and the meaning of Veterans Day.
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Today is Veterans Day, the day we recognize all of those who have ever answered the call and served honorably in our nation’s armed forces. This is a day where it is indeed proper to say “Happy Veterans Day” unlike Memorial Day, which is a solemn day of recognition. In a way, today is a global holiday, as it is known as Remembrance Day in the U.K., Canada, Australia and New Zealand, as well as other nations that make up or made up the British Commonwealth. This day is known as Armistice Day in France, Belgium and other European nations with no connection to the Commonwealth.
Originally known in the U.S. as Armistice Day, the idea was to celebrate in 1919, the one-year anniversary of the cessation of hostilities that ended World War I in 1918. That ceasefire was agreed to at the 11th hour of the 11th day of the 11th month. In 1938, Armistice Day was proclaimed a federal holiday by the U.S. Congress. In 1954, the name of the holiday was changed to “Veterans Day” and the meaning behind the holiday changed to honor all U.S. veterans.
Tuesday was the Marine Corps Birthday, which is kind of a private holiday celebrated only by those who have ever claimed the title of U.S. Marine and served honorably. The other branches have birthdays, but they don’t celebrate them like we do. They think we’re a little peculiar and we most certainly are. Veterans Day honors those who have served with the Marine Corps, Army, Navy, Coast Guard, Air Force and Space Force and done so honorably, so there’s a heck of a lot of us.
To those who served. Thank you. I am sure that there is a “free” meal for you out there somewhere. All of the fakers will be out there in their caps and jackets trying to get something for free. Think I’ll skip that nonsense. The banks are closed, schools are closed, the post office is closed, the bond market is closed. The stock market? Open for business, regular hours. Rock on.
Futures Markets Pop!
You may have noticed that the AI trade has been back in vogue through the overnight session. After a rather negative day on Tuesday. Interesting. On Tuesday, Fed Gov. Christopher Waller, who was considered for the top job and is considered influential, got things off to a tough start with some hawkish comments ahead of the opening bell.
Waller said: “I am leaning toward supporting an increase in our policy rate of 25 basis points at the FOMC’s December meeting … But if the October CPI inflation data out later today are similar to the past two monthly readings – with core CPI inflation around 0.3% or even higher, then a stronger policy move may be needed. In that case, I believe a 50 basis-point hike in the policy rate should be considered at the December meeting. Hiking only 25 basis points would put our credibility at risk.”
As we all know by now, October consumer price index was hotter than expected. For October, headline CPI grew 0.4% from September, decelerating from growth of 0.6%, but hotter than the 0.3% that had been the consensus view. At the core, CPI grew 0.3% month over month, even with September’s pace and hotter than the 0.2% print that we were looking (hoping) for.
Looking for the annualized data? Good luck. The Bureau of Labor Statistics did not publish the year-over-year CPI figures for October because it lacked the necessary October 2025 comparison data due to the 2025 government shutdown. Year-over-year CPI data is expected to be published for November. Private economists, in general, have estimated that for October, year over year CPI would have printed at headline growth of 3.9%, up from 3.7% and at the core, would have printed at growth of 2.8%, up from 2.6%.
These numbers and Waller’s comments forced Treasury yields sharply higher and took the likelihood of a half-percentage-point rate hike on Dec. 9 up to 14% from almost no chance. A rate hike of at least a quarter point on that day is now fully (100% probability) priced in. By day’s end, the U.S. Ten-Year Note paid 4.98% after having kissed the 5% level. That was up 10-basis points from the day prior. The Treasury Department had to auction off $42 billion worth of new Ten-Year Notes in that environment and that auction was not strong. That said, as mentioned above, the bond market is closed for Veterans Day. At the last sale, U.S. Ten-Year paper paid 4.99%.
So, Why The Overnight Rally?
A couple of reasons. First CoreWeave (CRWV) went to the tape on Tuesday evening with its third quarter earnings. Sure, CoreWeave lost money, but a lot less than expected, while revenues grew 169% year over year. The company, which as a neocloud, has been the poster child for the AI trade on the way down due to its capital spending and runaway debt load, then raised guidance. Party on, dudes.
CoreWeave now expects to see adjusted net income profitability in the first half of 2028, with adjusted losses projected to narrow meaningfully in 2027. CEO Michael Intrator cited higher pricing, graphics processing unit contract renewals, and continued demand for AI computing capacity as factors in the company’s profitability outlook. The company increased prices across its offerings by a rough 25% in July, followed by an additional 10% increase later in the quarter. Management indicates that pricing continued to rise in Q4, with increases more than offsetting cost increases. Hmmm.
In addition, management said last night that qualified demand for its computing capacity was about 10-times available capacity through 2027, while demand for 2028 was several times greater than capacity that can be brought to market. I see the shares up close to 13.5% overnight after closing 65% off of the stock’s 2026 high in early May.
AI 101
What is a neocloud? A neocloud is a specialized cloud provider built primarily to rent GPU computing capacity for AI training and inference. These GPUs to date have come mostly from Nvidia (NVDA) and Nvidia has helped these neoclouds finance their purchases. This is one reason why Nvidia’s recent issues are being seen as a potential opportunity for number two in the business, Advanced Micro Devices (AMD). These companies focus on high-performance GPU infrastructure, often with multi-year contracts, rather than a broad offering of general-purpose AI / Cloud services offered by the traditional hyperscalers.
More Than CoreWeave
So, the whole AI trade is doing better this morning because of CoreWeave? No. There’s more. Updated paperwork filed by Anthropic on Tuesday shows that the AI chatbot and software developer is targeting up to $64.4 billion in its IPO with an offering of 825 million Class A common shares at a price in a range spanning from $70 to $78. Additionally, the company will grant underwriters a 30-day option to purchase up to 123.75 million additional shares at the IPO price. potentially bringing funds raised up to $90.4 billion. At the high end of the range, this would value the entire firm at $1.405 trillion, fully diluted. That’s up from a valuation of $965 billion as recently as May.
Separately, Anthropic has also secured commitments from Advanced Micro Devices, Broadcom (AVGO), Alphabet (GOOGL), Micron (MU), Microsoft (MSFT), and Nvidia to purchase a combined $26 billion of Class N common stock through a private placement. The investors have agreed to buy the shares at a price equal to the IPO price. Class N shares are non-voting and are convertible into Class A shares. Class A shares will be listed at the Nasdaq under the symbol ANT. Class N shares are not expected to be listed.
The IPO is expected to be priced on November 18th, a week from today with the first public trade occurring on the 19th. A successful debut for Anthropic is probably key to stabilizing the tech / AI trade, so this information is calming. The other side of the same coin, which nobody is talking about, is that for every dollar invested in Anthropic, in theory, there is one less dollar available to be invested elsewhere.
So…
Enjoy the “not” day off, gang. Rock and roll.
Economics (All Times Eastern)
07:00 – MBA 30 Year Mortgage Rate (Weekly): Last 7.3%.
07:00 – MBA Mortgage Applications (Weekly): Last -1.2% w/w.
The Fed (All Times Eastern)
No public appearances scheduled.
Today’s Earnings Highlights (Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long AMD, NVDA, MSFT equity.
