Market Snapshot

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📉 Banana Bits

• U.S. mortgage rates climb to 7.40%, reaching their highest level in nearly three years

• U.S. jobless claims fall to 197,000 as layoffs remain historically low despite weak hiring

• WTO doubles its 2026 global goods trade growth forecast to 3.9%, driven by AI demand

• PepsiCo cuts its annual profit outlook as sluggish North American demand pressures margins

• China defends its yuan policy as Europe pressures Beijing over its record trade surplus

Market News

Chip Stocks Lead Tech Lower

Wall Street’s AI rally hit a speed bump Thursday as fresh questions over OpenAI’s reported revenue and mounting AI infrastructure costs weighed on technology stocks. The S&P 500 fell 0.47%, while the Nasdaq Composite dropped 1.25% and the PHLX Semiconductor Index plunged 3.4%. The Dow managed to buck the trend, edging up 0.10%.

A report put OpenAI’s annualized revenue near $50 billion at the end of September, below earlier figures approaching $70 billion. The discrepancy largely reflects differences in how revenue was calculated, while later reporting indicated OpenAI still expects to reach at least $70 billion in annualized revenue by year-end. Nevertheless, the initial report revived concerns over whether AI companies can generate sufficient returns to justify the hundreds of billions being poured into chips, data centers, and computing infrastructure.

Those concerns come as the industry increasingly turns to debt financing to fund its expansion. Broadcom is reportedly working to arrange more than $50 billion in financing for custom AI chips being developed with OpenAI, while Oracle is also exploring financing options for its own chip purchases. With borrowing costs remaining elevated, investors are growing more sensitive to how quickly that spending can translate into actual profits.

Beyond technology, markets were also navigating geopolitical uncertainty and a hawkish Federal Reserve. Brent crude jumped 4.1% to $104.28 a barrel Thursday as escalating threats to Middle Eastern oil shipments and production shutdowns ahead of Hurricane Isaias raised supply concerns. Prices retreated from session highs after President Trump said the U.S. would not attack Iran before the midterm elections. Meanwhile, Treasury yields retreated from earlier highs after a well-received $22 billion auction of 30-year government bonds.

Fed Governor Christopher Waller said Thursday that additional rate hikes would likely be necessary if economic conditions evolve as expected, but emphasized flexibility over their timing. St. Louis Fed President Alberto Musalem also suggested further tightening could be needed over the next six to nine months. On the corporate front, Oracle is reportedly trucking natural gas to AI data centers while awaiting pipeline connections, while Chipotle surged on reports that Starbucks had explored a takeover. Humana also rallied after hours following an improvement in its Medicare Advantage quality ratings.

Peel Take: Wall Street is asking the trillion-dollar question: Where are the returns on AI spending? The OpenAI revenue discrepancy doesn't necessarily mean demand is slowing, but it highlights how sensitive investors have become to the numbers behind the AI boom. With borrowing costs elevated and infrastructure spending accelerating, investors want to see more than ambitious spending plans. Eventually, those billions need to show up in earnings.

What's Ripe

Chipotle Mexican Grill Inc. (CMG) 6.21% 

• Chipotle jumped 6.21%, making it the S&P 500's top performer, following reports that Starbucks had explored a potential takeover of the burrito chain. Starbucks shares fell sharply intraday but recovered to close down just 0.40%.

• The reported discussions have not resulted in an announced deal, and Starbucks reiterated that it remains focused on its ongoing turnaround.

• Peel Take: Coffee and burritos might make an interesting combo, especially with former Chipotle CEO Brian Niccol now running Starbucks. But buying another restaurant giant while trying to turn around its own business would be a big undertaking. For now, Chipotle investors have takeover speculation to work with, not an actual offer.

Palantir Technologies Inc. (PLTR) 2.40% 

• Palantir climbed 2.40% to $198.78 after Goldman Sachs upgraded the stock from Neutral to Buy and set a $230 price target. The target represented roughly 18% upside from Wednesday's closing price of $194.12.

• The bank cited Palantir's expanding total addressable market, particularly in sovereign AI and customized enterprise applications, signaling confidence in the company's long-term growth opportunities.

• Peel Take: Goldman is betting that Palantir's growth story still has room to run. As businesses increasingly adopt AI-powered data analytics, Palantir could capture a larger share of enterprise spending. However, with expectations already high, the company will need to deliver strong growth to justify its premium valuation.

What's Rotten

Space Exploration Technologies Corp. (SPCX) 4.19%

• SpaceX fell 4.19% to $160.57 Thursday, extending Wednesday's decline amid a broader tech selloff and reports that the company is seeking roughly $40 billion in financing to purchase Nvidia AI chips.

• Shares rebounded approximately 2.3% in after-hours trading after SpaceX announced an agreement to acquire wireless spectrum from Grain Management, strengthening its plans to expand Starlink into the U.S. mobile market and compete with traditional telecom carriers.

• Peel Take: SpaceX is making some expensive bets on the future. Its AI ambitions require billions in financing, while the latest spectrum deal opens another growth opportunity for Starlink. Investors now have two big questions to consider: how much all this expansion will cost and how quickly it can start paying off.

argenx SE (ARGX) 11.83%

• Argenx plunged 11.83% after discontinuing its Phase 3 UNITY trial of Vyvgart Hytrulo for Sjögren's disease. An independent monitoring committee concluded that the study was unlikely to meet its primary efficacy endpoint, dealing a blow to the drug's potential expansion into another autoimmune indication.

• The setback overshadowed positive Phase 2 results for FB102 in celiac disease, as investors reassessed the company's pipeline and future growth opportunities.

• Peel Take: In biotech, one failed trial can wipe out billions in market value. While Vyvgart's existing commercial business remains strong, the setback removes a potentially significant growth opportunity. Argenx now faces greater pressure to deliver results from its remaining drug pipeline.

🧠 Technical Trip

Interview Q&A from Citadel

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🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• Nvidia-backed Firmus scraps its $5 billion Australian IPO following weak investor demand

• Ellison family contributes roughly $17 billion to the completed Warner Bros. takeover

• Viatris agrees to acquire Pacira BioSciences for $1.65 billion to expand its non-opioid pain portfolio

• Alphabet's Waymo secures $5 billion in debt financing to accelerate its autonomous driving expansion

Student Success Corner

Banana Brain Teaser

Previous

A company has $300 million in debt at a 7% interest rate. It refinances the entire amount at 5%. How much does its annual pretax income increase, assuming everything else remains constant?

Answer: $6 million

Today

You flip a fair coin three times. What is the probability of getting exactly two heads?

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

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