The cost of shooting for the moon

00:00:00: oil fluctuates and markets move with it, while investors continue to face higher energy prices inflation risk and the European debt stress here in Europe.

00:00:09: Meanwhile SpaceX's strong results yesterday revive enthusiasm for AI highlighting both booming demand for AI infrastructure but also enormous investment needs.

00:00:20: And today after Debell Metal will be releasing its own quarterly results which would offer another test AI theme as shooting for the moon comes with an increasingly expensive price tag and investors won't prove that returns will follow.

00:00:37: So welcome to Swiss Coats, daily market talk.

00:00:41: it's Wednesday twenty-first of October.

00:00:43: I'm Ipeco Skardeshkaya.

00:00:45: we'll talk about contrast between AI & rest of world economy.

00:00:50: but before you do please keep in mind opinions are my own and this is not financial advice.

00:01:03: This show is brought to you by SwissQuote.

00:01:05: So it happened again, ladies and gentlemen!

00:01:08: Oil reversed sharply from five months highs yesterday as reports of a Qatar-Pakistan peace proposal revived hopes for the US-Iran breakthrough.

00:01:18: But surprise, there was no agreement and the Moves reversed back as quickly after Reuters reported that Iran insisted its demands including lifting U.S.

00:01:30: blockade and oil sanctions be met before talks.

00:01:33: So here we are back to square one.

00:01:35: The price moves are driven by nothing more than empty hope with considerable uncertainty remaining.

00:01:42: So US period is back above the hundred dollar per barrel level this morning after swinging between ninety six to one-hundred and three dollars per barrel levels yesterday while brands regained a one hundred ten dollar per barral handle hopes yesterday.

00:02:02: Now higher oil obviously continues to pressure inflation expectations, hence global yields higher.

00:02:08: the European debt stress adds another layer of pressure.

00:02:11: obviously this spread between the French and German ten-year yield spike passed a one hundred fifty two level yesterday.

00:02:19: This is a fresh high since two thousand twelve.

00:02:22: so we are almost near the european sovereign debt crisis.

00:02:25: top levels for these metrics right now with no easy fix inside for France mind you, so the latter will likely continue to keep the euro under pressure against US dollar regardless of a broader US dollar appetite as European bond troubles could soften the European Central Bank's hand by delaying its next interest rate hike from the European central bank and mounting yields across Europe.

00:02:49: already tightened the financial conditions by increasing bargain costs.

00:02:53: And as per U.S.

00:02:55: dollar, the greenback retreats from mid-October peak levels of nearly one hundred and three level.

00:03:00: but the medium term outlook for the Greenback remains positive for now as rising energy prices across the globe and the rising safe haven demand also support the US dollar demand in this shorter run.

00:03:12: The longer term outlook remains negative due to the debasement trade.

00:03:17: Now moving to equities, the sharp retreat in oil prices fueled appetite and major US indices on Tuesday.

00:03:23: It also helped limit losses in this stock six hundred index in Europe which actually rebounded later in this session just a little bit down.

00:03:33: Technology in the

00:03:34: U.S.,

00:03:34: on the other hand remained under pressure after a catastrophic market debut from South Korean Elise, you know the south korean A.I cloud & data center company that tanked up in his first day of trading in Korea yesterday.

00:03:51: But the good news is that this company's up by around thirty percent today and Korean Cosby Index also has a better bid with two-and-a half per cent gains at the time I'm talking here, both US and European futures are pointing as positive start to Wednesday's trading session despite a rebound on oil prices.

00:04:11: so that crazy part!

00:04:13: Hope it's gone but the positive vibes stay!

00:04:15: Speaking of positive vibes, SpaceX revealed its quarterly report yesterday after the bell and announcement could hardly be better.

00:04:23: The company printed a one hundred sixty-one percent revenue graph from that same quarter last year.

00:04:30: They reported a sixty nine percent jump in Starling, the satellite internet division And nearly tenfold increase on this AI Division thanks to Mega deals that is struck with companies like Anthropik and Google renting out data capacity to these companies.

00:04:47: As such, SpaceX swung from a US dollar loss of USD by one billion in the same quarter last year.

00:04:56: I was saying a few weeks ago, remember that SpaceX could become an AI company rather than a space company.

00:05:03: At least in the short run and this is where we are right now there's actually potential for further substantial gains as AI business division as AI infrastructure is very capital intensive And SpaceX certainly has more means then many smaller companies.

00:05:19: they're dealing with growing credit stress Right Now In The Same Segnet.

00:05:23: And yes here i'm looking in particular at companies like Corby, for example which saw its default risk levels explode during the course of last week.

00:05:31: remember.

00:05:32: Corby's eight and a half percent coupon bond with two thousand thirty-two maturity is now yielding almost fifteen percent meaning that this company must pay potentially nearly fifteen percent to borrow today while SpaceX has comparable maturity bond worth two thousand three thirty-three maturity yields less than half.

00:05:54: This means that if the AI stress mounts further, SpaceX could swallow AI infrastructure businesses from smaller competitors on Earth with emissions to take them into orbit one day.

00:06:08: So let's admit that this could become a very good, yet obviously a very expensive story as well because to give some numbers one of SpaceX's biggest clients Anthropics said it spent nearly nine billion US dollars on computing capacity and AR infrastructure in the six months today And of June, that's more than what it spent during the entire year and this company will be spending more to allow its business to grab.

00:06:35: SpaceX in return is expected to spend nearly seventy billion US dollars in Capex alone.

00:06:42: But wait!

00:06:43: That Spending is expected reach almost two hundred billion USD by twenty-eight according to Global Head of Visible Alpha Research at SMPGlobal.

00:06:54: And otherwise, great growth comes with a great cost.

00:06:57: In regards to whether the merger between Tesla and SpaceX is good idea I would say that it could if two companies prove that synergies create value for both of these companies.

00:07:09: If Tesla is better off exploring AI synergies with other companies The deal can be rebugged by investors.

00:07:15: But anyway, SpaceX shares rallied upto nine percent in day after hours trading.

00:07:20: following earnings announcement There will some seven percent above the IPO opening price today at the open proudly.

00:07:27: Now it's hard to tell whether this company is expensive or whether it is cheap, its rather a question of how much do you believe in Elon Musk's capacity?

00:07:36: And speaking of AI and earnings, Meta will announce its latest quarterly results today after the US closing bell.

00:07:46: An analysts expect revenue to rise nearly twenty-four percent to sixty three point four billion us dollars in the latest quarter but net income could actually fall.

00:07:56: it's good for due to AR related cost squeezing margins But also a one off tax charge depressing earnings here.

00:08:03: more importantly investors.

00:08:04: we'll be watching The Bro.

00:08:05: the story which is Meta's K-Pak is expected to have more than double to almost forty two billion US dollars last quarter with free cash flow forecast at negative eight and a half billion us dollars.

00:08:19: So investors will want evidence that advertising growth, an adoption of its muse assistant can justify this huge spending.

00:08:27: And broadly speaking the spanning outlook from meta and hyperscalars like metal will send ripples across the broader technology indices in the coming days and weeks.

00:08:37: A bigger budget will continue to support chip makers and data centers by signaling continued demand for AI infrastructure, but high spending could revive leverage-spending worries.

00:08:49: As such, big technology results will likely create a potentially mixed reaction for the Nasdaq index.

00:09:00: Rebos spending could support AI enablers but weigh on those who actually spend this money in absence of robust revenue growth while software-spending plans could appease investors' worries regarding huge spending and would be terrible news for the AI supplier stocks that are already grappling with mounting credit stress as it is already priced in today's prices.

00:09:26: So this is all for today, I'm Yipega Skardesh Kaya and thank you for joining me And Thank You For All Your Beautiful And Supportive Comments!

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00:10:07: Good day trading!

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