The AI trade’s quarterly checkup

(Getty Images)

Hey Snackers,

New York City had an electric summer following the Knicks victory in the NBA Finals, and that sweet victory was enjoyed by basically everyone, with a few exceptions. One of those exceptions is “people who work for New York Knicks owner James Dolan.” When and how you have heard about the eccentric billionaire cable heir depends on which incredibly weird or petty thing Dolan did that made its way into your feed, from siccing facial recognition technology on perceived adversaries to making his vanity project band, JD & The Straight Shot,the de facto opening act for major stars playing at Madison Square Garden.

Still, a new report from The Athletic may take the cake for Dolan lore, as evidently when employees of the Knicks had been eagerly awaiting details on their eligibility for sought-after NBA Champions rings, Dolan insisted that IT send out a phishing test email purporting to offer everyone in the organization a free ring, with the people who clicked on the included link getting not a Knicks ‘26 ring but instead a mandatory cyber-security seminar.

Stocks fell on Friday.

This week is an earnings bonanza

The nice thing about business news is that it’s essentially the only category where the subjects legally have to be honest with you at least four times per year (or half that often in Europe). This week we’ll get a look past the bluster, the boasting, the rumors, and the suspicions about what’s actually happening with the AI trade, with companies representing the entire AI behemoth snout-to-tail reporting earnings.

• The big three are the hyperscalers, the companies that have existing cloud operations and ambitions to supplement those with large AI capital investments: Alphabet, Amazon, and Microsoft.
• Yes, all of them have their ancillary business that could be megacorps in their own right — Microsoft with its Office and video game divisions (and don’t forget LinkedIn!), Alphabet with its advertising and phone business, and Amazon with its retail operation — but realistically investors are going to be paying attention to their AI buildout, how much it’s costing, the manner in which they intend to cover those costs, and so on.
• Those costs are other companies’ sales, and we’ll be hearing a lot from them, too. If you want to build an AI data center (and these guys really, really do!) you’ve got to spend money that eventually ends up in the pockets of the disk storage companies (Sandisk and Seagate are both reporting), the chip manufacturers (Intel on Thursday, AMD the following week) and the companies that make optical communications equipment (Corning, on Tuesday) and power and cooling racks (Vertiv, on Wednesday).
• Those are just the direct suppliers, but you’ve got to build the things too, and for that you need power generation (GE Vernova reports Wednesday) and the equipment to construct the things (Caterpillar, the day after)

The long and short of it is that this week will be a check-up on virtually every component of the most important trade in markets. Traders will be making inferences based on these flagship companies for not just the rest of earnings season and their competitors, but also the overall health of the trade itself.

THE TAKEAWAY

The AI trade in general and semiconductors in particular have been rattled for the past few weeks, as my colleague Luke Kawa wrote in EntryPointlast Friday. The VanEck Semiconductor index has taken a beating over the past several months, with semis nearing a dip below the 200 day moving average that could spell algorithm-inflected pain for bulls. This week, we’ll get some serious clarity on what the current state of play is, and even better some insight into where these hyperscalers are forecasting things will go; earnings estimates over the next 12 months for the big guys have plateaued, and it’ll be interesting to see if they happen to agree.

— Walt Hickey

The one chart that explains why Netflix cleaned house

“At its core, Netflix dominated the streaming landscape in the early 2020s when other entertainment companies were just entering the streaming landscape. And now Netflix’s share of the top streaming shows is a lot smaller.”

Grand Theft Auto VI preorders are blowing previous records away.

Makes sense, the game’s got unprecedented appeal, I mean, it’s not like you can carjack a manatee in Hogwarts Legacy.

— Thomas Jones

Snacks Shots

• 📊 Senate Check In: Democrats are now a 70% chance to win the Senate. Democrats must flip four seats and hold all their current ones to take the Senate. Current state-by-state chances of a Dem flip: North Carolina (98%), Alaska (77%), Texas (67%), Maine (61%), Ohio (71%) and Iowa (42%).
• 🏈MNF: The undefeated Kansas City Chiefs take on the Seattle Seahawks this Monday night, but don’t let the 3-3 record in Seattle fool you, markets price the Seahawks at a 58% chance to win this one.

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

There’s been a huge shift in consumer preference in the fragrance industry, with scents in what’s known as the “gourmand” category — often sweet, rich smells like cherry, cotton candy or toffee — rising from a niche corner of the market with 9% market share to nearly a quarter of the industry, behind only perennial category leader florals.

What else we're Snackin'

• The market's favorite AI giants are stuck in a vicious catch-22
• Fewer people are flying as airfare soars. Here’s why airlines aren’t worried
• ‘Wildwood’ is Nike founder son’s latest unprofitable masterpiece
• Oura sues rival Ultrahuman again,threatening its U.S. smart ring comeback
• Wizz Air offers UK pilots buyouts as soaring jet fuel costs bite
• Wait, the average Muse agent purchase is over $200? Tell me what you're buying!

Snack Fact of the Day

The average length of an NFL game this season is up 7 minutes to 3 hours, 11 minutes. This comes at the same time that MLB cut their average game length down by 26 minutes over the past five years.

This Week

Huge week!

• Monday: Verizon earnings due out ahead of the open. Earnings from Cadence Design Systems slated for release after the close.
• Tuesday: Coca Cola, Corning, Boeing, Paypal, SoFi, UPS, Galaxy Digital, and Freeport McMoRan due out in the premarket. Earnings from Robinhood, Seagate, Visa, BigBear AI, and F5 slated for release after the close.
• Wednesday: Earnings from GE Vernova, Vertiv, Jersey Mike’s, Etsy, and Wingstop scheduled for release in the premarket. Federal Reserve decision at 2 p.m. ET. Google, Microsoft, ServiceNow, Ford, Fortinet, KLA Corp, Chipotle, T-Mobile, Carvana, and eBay earnings due out postmarket.
• Thursday: Caterpillar, Eli Lilly, Mastercard, Norwegian Cruise Line, Merck, Altria, Blue Owl Capital, FTAI Aviation. September PCE inflation report due out at 8:30 a.m. ET. Amazon, Sandisk, Intel, Strategy, Reddit, Coinbase, AXT Inc, Roblox, Starbucks, Monolithic Power Systems, Digital Realty, Rivian, Pinterest, and Dexcom slated to release earnings after the close.
• Friday: Earnings from AbbVie, Regeneron, and Exxon Mobil due out premarket. Q3 Employment Cost Index slated for release at 8:30 a.m. ET.

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