My $1,200 coffee machine is in the closet on timeout.
It started fighting me on Sunday. It wanted to be descaled, and it demanded its own special descaling tablets.
You can’t use vinegar, and it’s smart enough to know when you use the generic ones. Yes, the coffee machine knows.
So I asked my AI agent if it could go in there and talk to Mr. Machine for me. I was thinking Star Wars. Apparently, we’re not at that point yet, so I drank crappy iced coffee out of the fridge.
A Mad Dash For Cash
AI can’t negotiate with my coffee maker yet, and Meta still needs a fortune to build it.
On Monday, Meta told investors it’s selling $22.5 billion of new stock and $12.5 billion of mandatory convertible preferred stock, a type of share that turns into regular stock down the road. It also plans a $60 billion program to sell more shares starting next year, so you’re right around $95 billion.
Apparently, their AI strategy is working. They need a few hundred billion here or there, amongst friends.
So where do you think they’re going to spend that money? Probably in the semiconductors, and in the end, everybody needs Nvidia. Meta’s filing even names Nvidia, AMD and Broadcom as interested in buying up to $5 billion of the new stock.
That’s why the chip stocks caught a bid Monday while Meta, Apple, Google and Microsoft sold off. It’s Nvidia versus pretty much the world of big tech right now. Nvidia is a beast, but if there’s any slippage at all, it pulls the Nasdaq down in a hurry.
Their Credit Rating Doesn’t Suck
In my opinion, Meta gets the full $95 billion, because its credit rating doesn’t suck. Now look at CoreWeave, which rents out AI computing power.
It continues to get decimated.
You hear more and more stories of Nvidia hardware sitting in warehouses in the dark, because there isn’t the power or the data centers to plug it in. So the question is whether these tech firms can keep financing these egregious amounts of spending.
I’ll give you my own opinion, too. I think we’re only two or three years away from not needing these big data centers, because the large language models behind AI are going to compress themselves into next to nothing and fit on pretty much any device.
Take It Slow
On Wednesday, you get a Fed decision and something like $7 trillion to $8 trillion of market cap reporting earnings, including Google and Microsoft. Amazon follows on Thursday. These are the companies writing the checks.
The options market is pricing a $153 expected move in the S&P 500 this week. The expected move is the range traders are paying for, up or down, based on option prices.
So take it slow. I’m saving most of my trades for Wednesday, Thursday and Friday, and that’s where I’d do your positioning, too.
Wednesday is where all of this collides. At 2 p.m. ET, the Fed decides, and after the bell, Google and Microsoft tell you how much more they’re spending.
I’m going live for the decision, and I’ll be looking at:
- How the big institutions, the options market and retail traders each react in real time
- Why the banks behind Anthropic’s IPO stand to make billions, and why that gives them every reason to keep this market propped up until it lists in mid-November
- Nvidia, the one stock holding up the Nasdaq, and what happens if it slips
- The sector winners and losers once the dust settles
→ Watch My Live Fed Reaction Wednesday
To your success,
Don Kaufman
P.S. If you trade earnings with short-dated options, heads up. Microsoft and Google pulled their Wednesday expirations, the same day they report. I’ll be on at 2 p.m. ET Wednesday, so grab your spot here.
