AI trade — sellers of compute sold, buyers bought: chips −5.6%, software +5%, SoftBank +7% in Tokyo
The market took one session to decide what a slower frontier is worth, and its answer was a split, not a sale. On the side that sells compute, the semiconductor ETF fell 5.6% to $497.40, through the $505 line and below Thursday’s $517.43, with Nvidia −3.4%, AMD −4.4%, Micron −5.3% and SanDisk −5.0%; the Rubin build-out index lost 5.3% with all eight layers red, and the interconnect, data-centre power and equipment groups fell 7% to 8.5%. On the side that buys compute, the software ETF rose 5.0% to $106.64, its best day of the year; Zscaler +16.5%, SentinelOne +14.5%, CrowdStrike +13.9%, Palo Alto +13.1%; Microsoft +2.0%, Alphabet +3.2%, Meta +2.7%. The S&P 500 closed $760.88, −0.4%, the Nasdaq-100 $709.18, −0.8%, the Dow −0.2%: the index barely moved because the two halves of the trade cancelled.
AI trade — sellers of compute sold, buyers bought: chips −5.6%, software +5%, SoftBank +7% in Tokyo
1 The sort: chips −5.6% to $497.40 through the $505 line, software +5.0% to $106.64 on its best day of the year, security +13% to 17% — S&P 500 −0.4% to $760.88, Nasdaq-100 −0.8% to $709.18, Dow −0.2%, Russell −0.3%; volatility 17.1
2 Asia, the morning after: Kospi −1.2% to 6,604, SK Hynix −0.9%, Samsung −0.7%; TSMC unchanged at NT$2,380, Taiex −0.7%, MediaTek −2.0%, Alchip −6.4%; Nikkei −0.5% to 63,196, Advantest −4.0%, Tokyo Electron −1.2% — and SoftBank +7.2% after Monday’s −11.3%
3 Rates and oil into the Fed: the 10-year touched 5.00% on Monday, first since October 2023, and is 4.96% this morning; the 30-year 5.33%; Brent $107.34, +1.6% overnight, WTI $103.27; dollar 99.6; gold $4,338; Empire State −8.7 with new orders −19.6
4 The $505 line is gone: semiconductor ETF $497.40, below Thursday’s $517.43 and 6.4% under its 50-day at $531.52; memory and storage led on the way down again — Micron −5.3%, SanDisk −5.0%; Corning −13.7%, Teradyne −13.3%, Coherent −12.7%, MACOM −12.8% inside Rubin
5 Our indices on Monday’s closes: Rubin −5.3% to 1,859.75 with all eight layers red, US −7.0%, Europe −7.9%, Japan −0.5%; HALO flat at 1,019.69; AW40 +4.0% to 946.64 on its applications layer +5.8%; the agentic ecosystem +4.3% to 1,597.67 on security +11.9%; Euro-AI −2.1%, its chips −6.9%, its enterprise software +5.5%
6 Print record, the night before: Oracle $144.79, 5.3% under its $152.94 entry and below the $148.35 sold line; Adobe $265.60, +6.7% from $248.83 and above the $256.29 paid line — both scored at tonight’s close, the third session after their prints
7 Outside view: the weekend’s essay is being sorted into winners and losers rather than sold — Monday’s press ran ‘Investors Are Sorting the Winners and Losers From an AI Slowdown’ beside ‘Talk of AI Pause Slams Nvidia, AMD and Intel’; Microsoft, Alphabet and Meta rose while Nvidia fell
8 China, for the record: August factory output growth quickened while retail sales slowed and missed, and the investment slump deepened — CSI 300 −0.3%, Hang Seng −0.6%; Japan’s tax-cut outline sidesteps its funding, the yen 154.9
9 Cross-asset check: the Magnificent Seven fund $70.10, above its 69.5 line; volatility 17.1, up 8%; the equal-weight agentic winners +4.0% against the physical layer −5.3%, a nine-point gap between our two US layers in one day; futures −0.4% to −0.5%
10 The clock: the Fed’s two-day meeting begins today, a hike priced at about four in five; Oracle and Adobe scored at the close; Taiwan’s August revenues this week; retail sales 12:30 UTC Wednesday, the decision 18:00 UTC, the press conference 18:30; Bank of Japan Thursday and Friday; quarterly expiry Friday — and the levels: $757.83, $708.69, $517.43, $505 lost, 5.00%, 6,600
Rates — the 10-year hits 5.01%: Dow −0.9%, Russell −1.2%, the AI sort pauses, Oracle and Adobe hold their lines
1 ETF board: a rates day — SPY −0.5% to $757.13 under Thursday’s $757.83, QQQ −0.5% to $705.37 above 704, DIA −0.9%, IWM −1.2%, equal-weight −0.4%; SOXX +0.3% to $498.65 under $505, SMH +0.1%, tech flat, software flat at $106.62; TLT −0.2%; VIX +2.6% to 17.6; memory ETF $54.88, under $58
2 Rates: the 10-year prints 5.008% this morning, the highest since October 2023, and is 4.99% at midday; the 30-year 5.33%; a quarter-point hike priced at about four in five for Wednesday; dollar index 99.6, +0.2%; yen 155.07; high yield flat
3 The sort, day two: chips flat, not recovering — SOXX +0.3% at $498.65 under $505; AMD +2.0% to $503.50, Arm +2.7%, Marvell +2.0%, Nvidia +0.6% to $212.27, ASML +1.1% — while the equipment names are sold again: Lam −2.3%, Applied Materials −1.2%, KLA −0.9%; Broadcom −1.4%, TSMC −1.0%, SanDisk −1.2%
Every part of the AI trade is priced off one number this week, and it is not the Fed funds rate. The 10-year real yield — the Treasury yield after inflation, read from TIPS — stood at 2.60% on Friday, up 28 basis points in twelve sessions, while the 10-year breakeven stayed at 2.37%. The whole rise in nominal yields since late August was real. Credit did not move: investment-grade spreads 0.80%, high-yield 2.65%, the fourth percentile of three years. Our credit stress tape says the same thing from the issuer side — Oracle’s 2055 bond yields 7.62%, Nvidia’s 2050 bond 6.26%, both up 60 to 75 basis points since June, and almost all of it is Treasuries. The cost of the build-out went up because real rates went up, not because lenders doubt the borrowers. That is why Monday sold the sellers of compute and bought the buyers, and why the Fed’s decision tomorrow matters most to the layer with the longest cash flows.