Market Snapshot

Get a Top Job Offer, Guaranteed (or tuition is free) | Apply Here

📉 Banana Bits

• U.S. budget deficit reaches nearly $2 trillion as record debt interest deepens fiscal pressures

• ECB warns higher bond yields could slow European growth and ease inflation pressures

• Indonesian stocks plunge as MSCI threatens to downgrade the country's market classification

• Microsoft abandons major UK data-center agreement with Nscale following delays securing sufficient electricity

• China's economy grows 4.5% in the third quarter, slightly beating expectations despite weak domestic demand

Market News

AI Rout Sends Chip Stocks Into Historic Slump

Wall Street ended the week under pressure as another wave of technology selling pushed the Nasdaq 100 to its worst weekly performance since the April 2025 tariff turmoil. Chipmakers declined for an eighth consecutive session, their longest losing streak since 2008, as investors questioned whether the AI infrastructure boom could generate sufficient returns to justify its enormous costs.

The S&P 500 fell 1.1% Friday, while the Nasdaq Composite dropped 2.1% and the Dow slipped 0.3%. AI cloud provider CoreWeave plunged nearly 12%, bringing its weekly decline to roughly 25%, as investors grew concerned about its heavy debt load and rising financing risks. Yields on some of the company's bonds surged into distressed territory, highlighting growing unease about the debt financing behind the AI buildout.

The selloff followed another round of hotter-than-expected inflation data, with September consumer prices rising 3.7% year over year and producer prices jumping 1.3% for the month. The readings initially revived concerns about further Federal Reserve rate hikes, adding to pressure on heavily indebted AI infrastructure companies. However, rate-hike expectations moderated later in the week, while Treasury yields declined as investors sought safety amid the technology selloff.

Meanwhile, Nvidia CEO Jensen Huang defended AI's long-term potential, arguing that the technology's transformative benefits would eventually outweigh investors' near-term concerns. Oil prices also surged Friday, with Brent crude settling near $110 a barrel amid continued supply disruptions. However, crude retreated Monday morning following President Trump's temporary waiver of certain Russia-related sanctions and tariffs, raising the possibility of additional fuel supplies. Meanwhile, U.S. stock futures pointed higher ahead of another busy earnings week.

Beyond the AI selloff, corporate developments highlighted diverging trends across industries. Apple's first foldable iPhone, priced at $1,999, saw delivery estimates stretch into January shortly after preorders opened, suggesting strong initial demand alongside potentially constrained supply. ExxonMobil signaled that stronger refining margins could boost third-quarter downstream earnings by approximately $4.5 billion from the previous quarter as geopolitical disruptions lifted fuel prices.

Meanwhile, SoftBank reportedly explored acquiring Allied Universal in a potential transaction valuing the security services company's equity at up to $18 billion, as part of its broader push into AI-powered robotics. Overseas, China's economy grew 4.5% in the third quarter, slightly exceeding expectations, although weak domestic demand and the prolonged property downturn continued to weigh on the outlook.

Peel Take: Wall Street's AI trade is facing one of its biggest tests yet as investors shift their attention from AI's growth potential to its actual profitability. CoreWeave's debt concerns highlight the risks of financing massive infrastructure investments when borrowing costs remain elevated. With Meta and other major technology companies reporting earnings this week, investors will be looking for evidence that record AI spending can translate into sustainable earnings and cash flows.

💼 Career Watch

Moelis typically opens its U.S. Summer Analyst applications in December of sophomore year. If you're targeting summer 2029, preparing now gives you a head start before your recruiting cycle arrives.

👉 Apply to WSO Academy

What's Ripe

Alcoa Corp. (AA) 2.55% 

• Alcoa climbed 2.55% Friday after the aluminum producer reported third-quarter adjusted earnings of $1.82 per share, beating Wall Street's expectations of approximately $1.51. Revenue reached $3.70 billion, slightly below estimates.

• Lower production costs and higher alumina prices helped support profitability, partially offsetting lower aluminum prices and shipments. The results highlighted Alcoa's operational improvements despite continued volatility in commodity markets.

• Peel Take: Alcoa's earnings beat shows how operational improvements and stronger alumina pricing can support profitability, even when revenue falls short of expectations. But with earnings still heavily exposed to commodity prices and global industrial demand, sustaining that momentum will depend on favorable market conditions.

Travelers Cos. Inc. (TRV) 1.47% 

• Travelers rose 1.47% after the insurance giant reported third-quarter core earnings of $9.18 per share, comfortably exceeding Wall Street expectations. The stronger results came despite an increase in catastrophe-related losses compared with the previous year.

• Record net investment income of approximately $1.1 billion before taxes, up 6% year over year, and favorable reserve development helped support profitability. The company's combined ratio also improved to 86.8%, reflecting solid underwriting performance.

• Peel Take: Travelers' earnings beat highlights the resilience of its insurance business despite rising catastrophe costs. Strong investment income and disciplined underwriting helped offset those losses, but increasingly severe weather events remain an important risk to future profitability.

What's Rotten

CoreWeave Inc. (CRWV) 11.91%

• CoreWeave plunged 11.91% Friday, bringing its weekly decline to roughly 25%, as investors grew increasingly concerned about the sustainability of debt-financed AI infrastructure spending. The selloff intensified amid growing worries about the company's substantial debt load and the potential impact of elevated borrowing costs.

• Yields on CoreWeave's bonds due in 2031 surged above 16% during the week, while the cost of insuring against a default climbed sharply. The moves signaled growing credit concerns as investors questioned whether future AI revenues would justify the company's enormous infrastructure investments.

• Peel Take: CoreWeave is becoming a key test of whether AI's infrastructure boom can translate into sustainable profits. With its borrowing costs under scrutiny and credit markets signaling greater risk, investors are questioning whether future cash flows will support its aggressive expansion. The demand for AI computing is real, but financing that growth is becoming an increasingly important part of the investment thesis.

Strategy Inc. (MSTR) 9.56%

• Strategy plunged 9.56% Friday after MSCI approved new rules that could exclude companies classified as non-operating businesses, including Bitcoin-focused Strategy, from its global equity indexes. The rules take effect with the November 30 index review, although Strategy's removal has not yet been confirmed.

• MSCI plans to publish the final list of affected companies on November 11. The potential exclusion raised concerns about selling by index-tracking funds, with Strategy previously estimating that removal could trigger approximately $2.8 billion in share liquidation.

• Peel Take: Strategy's potential removal from MSCI indexes highlights a growing risk for companies built around holding Bitcoin rather than traditional operating businesses. Exclusion could force passive funds tracking those indexes to sell shares, adding another source of selling pressure. With its valuation closely tied to Bitcoin, Strategy now faces both cryptocurrency volatility and potential index-driven selling.

🧠 Technical Trip

Interview Q&A from JP Morgan

👉 Want 1-on-1 recruiting help from JP Morgan bankers & 5,000+ top mentors? Apply to WSO Academy

🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• Proofpoint lines up $1.25 billion in financing, with JPMorgan and UBS leading the planned debt sale for its Varonis acquisition

• EQT agrees to acquire Australia's Cleanaway in a $6.5 billion deal, including debt

• Anthropic signs its first Canadian data-center lease with EverWind in Nova Scotia

• CVC-backed Panzani and Portugal's Cerealis enter exclusive merger talks to create a €1.8 billion European food group

Student Success Corner

Banana Brain Teaser

Previous

A startup's founder initially owns 100% of the company. An investor contributes $5 million at a $15 million pre-money valuation. A second investor later contributes $10 million at a $30 million pre-money valuation. Assuming no other share issuance, what percentage of the company does the founder own after both rounds?

Answer: 56.25%

Today

A trader buys a call for $7 and a put for $5, both with a $100 strike price and the same expiration. What are the two breakeven stock prices at expiration?

How Would You Rate Today's Peel?

Happy Investing,
Elie, Mitchell, Fernanda, Nick, & Patrick

ADVERTISE // WSO ALPHA // ACADEMY // COURSES // LEGAL