Last wk, $KBWB -1% despite low bank earnings expectations. AI was hit despite beat/raise from $ASML -8%, $TSM -9% due to AI financing concerns w/ AirTrunk IPO delayed, debt getting hit w/ $CRWV -25%, Anthropic rev growth slowing & valuation looking ~$1.5T vs $2T. Last Sunday I wrote that I was circumspect on the market. The KBWB (bank ETF) was sending a very different message than the S&P. “Any further sell-off despite trading at oversold levels last week would not be a great sign.” On Tuesday I posted on the KBWB getting hit despite these low expectations on mixed earnings results and therefore remaining circumspect. The Magnificent 7 eventually closed the week down 3.2% with the SOX Index (Semiconductors) down 11.4% driving the S&P down 1.9%. There was rising angst on the financing part of the AI trade later in the week. This was despite 5/10/30yr yields going down 15-17 bps last week despite hotter than expected CPI/PPI. After yields initially surged, this large drop was unexpected but this also coincided with the equity market sell-off from Wednesday through Friday. Massive external capital is needed to fund the AI infrastructure buildout. Therefore AI stocks got clobbered last week on questions around: 1) ability to raise AI public equity – Airtrunk IPO delayed till 2027 following the pulling of Firmus IPO last week 2) cost of AI debt increasing- CDS costs surging and face value of debt getting hit driving the yield to 15% for Coreweave debt 3) AI revenue growth slowing from ~145% q/q in Q2 to ~45% in Q3 for Anthropic 4) AI valuation now seen at closer to $1.5 trillion vs $2.0 trillion for some investors following Anthropic’s investor day 5) Gartner stating they expect greater than 80% of neoclouds to fold or face restructuring by 2030 6) Chinese DRAM company CXMT (-12% last week) ramping 4F technology before year-end being a threat to the current big 3 of $MU -15% last week, Samsung -18% and Hynix -24%. As for other important macro moves last week, US Oil was +10% last week with the US dollar down 37 cents but Gold declined 1% anyway. Thursday I posted the details around the historical precedent for a rally in the Korean Kospi Index over the following day and week given its extremely oversold levels. While the Kospi did rally on Friday +2.0%, the SOX Index was hit for 3.8% anyway and was down 11.4% for the week vs the Kospi -14.5%. While the Kospi, driven by the declines in memory stocks, is now down 40% from its 52 week high and is up 34% year-to-date, the SOX is down only 24% from its 52wh and is up 57% ytd. Looking forward, the first two of the Magnificent 7 report CQ3 earnings next week on Wednesday. For $META, while I see a beat and raise quarter, the stock is probably going to react to initial expense and capex guidance for 2027 coming in high, especially given the strong recent stock performance. The costs needed to support their hit Agentic product Muse and their recently released frontier LLM models, is likely to occur before their monetization. For $TSLA, the videos of their new “flying” Roadster were mind blowing. This is just a reminder why engineering god Elon gets mind blowing valuations for his companies. I also believe the Roadster is a physical example of why $SPCX (which also reports next week) buying Tesla makes sense. In summary, the recent correction made sense for reconciling some of the discrepancies between the bond market and equity markets. But I believe there is still a lot of infrastructure growth ahead to support the proliferation of personal Agents. As a result, I think it makes sense to invest some of the excess cash levels that I have been recommending. The SOX is now down 8 days in a row for a loss of 15.7% through Friday. The last time the index fell for 8 or more consecutive trading days ended on Friday October 10th 2008 for a loss of 19.8%, during the Global Financial Crisis. It then bounced for just one day the following Monday for 9.7% before continuing to much lower levels. The AI trade may be having some funding concerns today but it is not as bad as during the GFC. All the best in the week ahead.