Market Snapshot

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📉 Banana Bits

• Nasdaq rebounds 0.83% as Nvidia and other AI heavyweights rally, while the Dow slips 0.38%

• AMD reports record quarterly revenue of $13.4 billion after Tuesday's close as AI-driven data center sales surge 97%

• Apple shares fall 1.9% after the company warns rising memory-chip costs could squeeze holiday-quarter profit margins

• Democrats win control of both the House and Senate following Tuesday's U.S. midterm elections

• Oil prices fall to nearly four-week lows as hopes for peace talks offset supply disruption concerns, with Brent settling at $103.60

Market News

Wall Street Rebounds on Tech Gains

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Wall Street had a mixed day Tuesday, but tech stocks helped keep the broader market moving higher. The S&P 500 gained 0.36% and the Nasdaq rose 0.83%, while the Dow fell 0.38%. Nvidia and Broadcom climbed 2.3% and 3.1%, respectively, as investors continued betting on artificial intelligence.

Not every tech company joined the rally, though, with Apple falling 1.9% after warning that rising memory-chip costs could pressure its profit margins. The rebound also came after the Nasdaq-100 entered correction territory on Monday, falling more than 10% from its October peak.

Investors also had their eyes on Tuesday's midterm elections, which could influence government policy and market expectations. For now, enthusiasm around AI is still giving stocks a boost, even as questions about how much companies are spending continue to grow.

The bigger story is how much money companies are pouring into AI infrastructure. Meta announced another $15 billion bond offering to help finance its expansion, with the company expecting capital spending of $135 billion to $145 billion this year, largely driven by AI investments.

Investors are increasingly watching whether these massive investments will eventually translate into stronger profits. Meanwhile, companies outside the tech sector have had a harder time keeping up with the market's biggest winners. Most S&P 500 stocks actually fell Tuesday despite the index finishing higher, showing how much of the market's performance depends on a relatively small group of companies.

There was also some encouraging news after the closing bell, as AMD reported record quarterly revenue of $13.4 billion, up 45% year over year. Its data center business surged 97% to $8.5 billion, driven by strong demand for AI chips and server processors. The company also forecast roughly $17 billion in fourth-quarter revenue, signaling continued momentum in AI infrastructure spending. With earnings season continuing and the midterm election results now coming into focus, investors have plenty of reasons to stay cautious.

Peel Take: Tuesday's rebound was a reminder that a few big tech companies can still move the entire market. The S&P 500 gained 0.36% even though most of its stocks actually fell, which tells you just how much weight companies like Nvidia carry. Investors clearly haven't given up on AI, but they're becoming more selective about where they put their money. Meta tapping the bond market for another $15 billion shows just how expensive the AI race has become. That's not necessarily a bad thing, but eventually investors will want to see those investments pay off. For now, Big Tech is keeping Wall Street afloat, but relying on the same handful of companies to drive gains could become a problem if enthusiasm starts to fade.

What's Ripe

Fiserv (FISV) 12.46% 

• Fiserv shares surged after the payments company reported adjusted earnings that slightly exceeded expectations and reaffirmed its full-year outlook.

• The company also announced plans to resume share buybacks earlier than expected and doubled its cost-saving target to $1 billion, giving investors more confidence in its turnaround.

• Peel Take: Fiserv finally gave investors something to celebrate. After a difficult stretch, the company is showing progress on cutting costs and returning money to shareholders. The big question now is whether it can turn those efforts into stronger growth and profits.

Fabrinet (FN) 15.45% 

• Fabrinet shares jumped after the company reported record quarterly revenue of $1.47 billion, a 51% increase from the previous year.

• Strong demand for optical components used in AI data centers helped fuel growth, while an upbeat outlook for the next quarter gave investors another reason to cheer.

• Peel Take: Everyone talks about Nvidia when it comes to AI, but Fabrinet is proving there's money to be made behind the scenes. As tech giants build more data centers, someone has to supply the equipment connecting everything. Fabrinet is benefiting from that demand, and investors clearly like what they're seeing.

What's Rotten

Shopify (SHOP) 8.74%

• Shopify shares tumbled after the company reported quarterly results that disappointed investors, with gross merchandise volume and subscription revenue falling short of expectations.

• Revenue still grew 32% year over year to $3.74 billion, but weaker-than-expected sales metrics raised concerns about whether the company can maintain its rapid growth.

• Peel Take: Shopify learned that investors don't have much patience when growth falls short of expectations. The company is still growing quickly, but Wall Street wanted more. With expectations already high, even one disappointing quarter can send shareholders running.

Gartner (IT) 13.19%

• Gartner shares plunged despite the company reporting earnings that exceeded Wall Street's expectations and raising its full-year outlook.

• Investors were more concerned about sluggish contract-value growth, which increased just 2.5% year over year, and a weaker-than-expected implied fourth-quarter outlook.

• Peel Take: Gartner beat expectations and still got punished. That's because Wall Street cares just as much about where a company is going as where it's been. Strong earnings are nice, but when underlying growth doesn't meet expectations, investors tend to focus on the bad news. Gartner found that out the hard way.

🧠 Technical Trip

Interview Q&A from Blackstone

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🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• CrowdStrike agrees to acquire AI security firms Fiddler and Dreadnode for a reported $495 million.

• Lonza agrees to acquire five U.S. manufacturing sites from Merck KGaA, more than doubling its U.S. footprint.

• Marathon Petroleum agrees to sell two refineries and related assets to CVR Energy for $4.2 billion.

📊The Daily Poll

Student Success Corner

Banana Brain Teaser

Previous

The market is equally likely to be in a bull or bear regime. In a bull regime, each stock has an 80% probability of rising; in a bear regime, that probability falls to 30%. Two stocks rise, with their movements independent conditional on the market regime. What is the probability that the market is actually in a bull regime?

Answer: 87.67% probability

Today

A trader's strategy has a 50% probability of making money on any given trading day, with outcomes independent across days. The trader wants to achieve three consecutive profitable days. Starting fresh, how many trading days should the trader expect to wait, on average, before achieving that streak?

How Would You Rate Today's Peel?

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

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