3 min read
The AI money got creative
The chip index jumped 3.6% on Tuesday after Broadcom agreed to lend Anthropic up to $42 billion to lease its chips. Boeing fell 10.7%.
The Close The Nasdaq gained 308 points, or 1.2%, to 26,478. The S&P 500 rose 0.6% to 7,723. The Dow barely moved, up 16 points, held back by a 10.7% drop in Boeing. Small companies kept pace. The Russell 2000 rose 1.2%. Oil fell for a third straight day, and U.S. crude slipped below $100.
The chip stocks led again. AMD rose 5.5% and Dell 7.5%. Broadcom gained about 4% on its Anthropic agreement. Anthropic also agreed to pay SpaceX up to $120.5 billion for computing power through 2029. Boeing fell 10.7% after a bigger loss than expected and more production delays. Xylem, the water technology company, lost 14.2% after it missed forecasts and cut its outlook. The oil refiners fell hard as crude prices eased: Valero lost 9.2%. On the plus side, Pentair jumped 12.8% after beating forecasts. UPS gained 5.8% after it beat and raised its outlook. General Motors rose 5.5% after saying it will move its stock listing from the New York Stock Exchange to the Nasdaq. What The Market Is Pricing In Look closely at the Broadcom agreement. Broadcom helps design the AI chips. Anthropic wants to use them. So Broadcom lends Anthropic the money to lease them. Wall Street calls this vendor financing: the seller lends money to the buyer so the buyer can afford the product. It helps the seller book sales today. It also means the seller is now carrying the buyer's risk. That's the third new money source for AI in two days. Monday brought Anthropic's IPO filing, Meta's stock sale and a SpaceX financing agreement. Tuesday brought a chip maker lending to its own customer. Investors cheered all of it, and the chip index is up more than 6% in two sessions.
I've seen this before. In 1999 and 2000, telecom equipment makers like Lucent and Nortel lent billions to their own customers to buy their gear. When many of those customers went bust, the lenders took heavy losses. Anthropic and Broadcom are far stronger than most of Lucent's customers were. But the pattern is worth knowing. Today, the Fed and Big Tech get their say. What's Next Three things I'm watching today and this week: 01 The Fed The Fed announces its rate decision today, Wednesday, October 28, at 2:00 p.m. Eastern, and Chair Kevin Warsh speaks at 2:30 p.m. Traders expect no change today, but they see about an 80% chance of a hike in December. Listen for whether he pushes back on that. 02 Microsoft and Alphabet Both report today, Wednesday, October 28, after the close. Amazon follows Thursday, October 29, after the close. Visa beat forecasts after Tuesday's close, with payments volume up 9%, but its stock slipped in after-hours trading. Even good numbers face a high bar this week. 03 Growth and Inflation The first estimate of third-quarter growth and the PCE inflation report, the Fed's favorite price gauge, both come out Thursday, October 29, at 8:30 a.m. Eastern. With oil easing, a softer inflation number could cool those December hike bets. AI keeps finding new money. Today we find out what the Fed and Big Tech think of it.
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