markets

Luke Kawa1/28/25

The Magnificent 7 prevented a market crisis even as Nvidia cratered

Another silver lining from Monday’s market rout: though one tech titan lost more value than any other company has before, crucially, US megacap tech giants did not decline in unison.

Apple — perhaps because of its dearth of AI prowess — had a huge rally, as investors seemingly flocked from Nvidia to the iPhone maker. Meta booked a solid gain as well, while Amazon also inched higher.

Call it protective rotation. Even on a very dark day for stocks, more money seemed to move between the Magnificent 7 cohort than out of the market completely, the latest piece of momentum behind a trend that’s generally been gaining strength for well over a year.

We’ve discussed at length how low correlations between these trillion-dollar companies are the key feature of this market backdrop that’s kept realized volatility suppressed. It was one of our top charts to watch for a reason, and just passed a pretty challenging test.

Occasionally — but not always — this holds true even on no good, awful days for the market. Monday’s session was something of a positive outlier in this regard. Some things worth highlighting when we look at the 35 sessions in which at least two members of this cohort fell by at least 3% since the start of June 2023 (when news mentions of “Magnificent 7” started to ramp higher):

We don’t have that many instances of two or more members of this club falling in excess of 3% in the same session — this happens about two times every five weeks. That’s a big reason why realized correlations and volatility have been low for most of this period, to begin with!
Of the 20 times besides Monday when exactly two Magnificent 7 stocks have fallen at least 3%, we’ve tended to see broader downside participation.

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US stocks just suffered one of their most stunning reversals in 32 years

Only four times in the more than 32-year history of the SPDR S&P 500 ETF has the fund opened at least 1.5% higher only to end the session down 1.5% or more.

And one of those days was today, with early enthusiasm over Nvidia’s strong earnings report turning into a wave of selling as speculative assets, chief among them bitcoin, cratered and dragged everything down with them. The S&P 500’s winners in particular saw heavy selling. Among the 15 stocks in the index that are up at least 70% year to date, the average performance on Thursday was down 5.6%.

The other occasions where US stocks have suffered such a violent turnabout:

April 8 of this year (the bottom, year to date!), when the White House said tariffs on China were going up to above 100%, kneecapping a nascent bounce-back attempt after a 10% drubbing in the three days after the Rose Garden tariff announcements. President Donald Trump would go on to announce that he was slashing reciprocal tariffs for 90 days the following session.

And the other two such instances both occurred in October 2008 (on the 7th and the 9th), as the fallout from the unfolding financial crisis was spreading after the prior month’s collapse of Lehman Brothers and the VIX Index, Wall Street’s so-called “fear gauge,” was routinely above 50, making immense volatility par for the course.

Tasha Matsumoto

Stocks sink as strong Nvidia earnings fail to ease Wall Street’s AI anxiety

The S&P 500, Nasdaq 100, and Russell 2000 all fell, with tech leading the sell-off.

Chicago Bears wide receiver Trent Taylor (15) fumbles a punt during the first quarter of the National Football League game between the Chicago Bears and Cleveland Browns

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Matt Phillips6h

Insurance against Oracle default becomes favorite AI-bust hedge, Bloomberg reports

Volume in the market for credit default swaps — essentially a kind of insurance against a company defaulting on its debts — on Oracle is surging as the company has supercharged its borrowing to finance its AI ambitions, Bloomberg’s Caleb Mutua reports:

“The price to protect against the company defaulting on its debt for five years tripled in recent months to as high as about 1.11 percentage point a year on Wednesday, or around $111,000 for every $10 million of principal protected, according to ICE Data Services.

As AI skeptics rushed in, trading volume on the company’s CDS ballooned to about $5 billion over the seven weeks ended Nov. 14, according to Barclays Plc credit strategist Jigar Patel. That’s up from a little more than $200 million in the same period last year.”

A Hedge Against AI Crash Emerges as Oracle CDS Market Explodes

A Hedge Against AI Crash Emerges as Oracle CDS Market Explodes

“The price to protect against the company defaulting on its debt for five years tripled in recent months to as high as about 1.11 percentage point a year on Wednesday, or around $111,000 for every $10 million of principal protected, according to ICE Data Services.

As AI skeptics rushed in, trading volume on the company’s CDS ballooned to about $5 billion over the seven weeks ended Nov. 14, according to Barclays Plc credit strategist Jigar Patel. That’s up from a little more than $200 million in the same period last year.”

Vince Carter

Nvidia dunks on the doubters

CEO Jensen Huang and CFO Colette Kress dismantled most of the recent arguments and bear cases put forward by their naysayers.

markets

Matt Phillips8h

Cipher Mining surges on additional AI hosting deal

Bitcoin miner turned AI compute power provider Cipher Mining jumped early Thursday after announcing a deal that fully leases its Barber Lake data center in Colorado City, Texas.

The deal — which is also giving a lift to IREN, another miner turned compute provider — is an expansion of a previous agreement with Fluidstack, a UK-based provider of GPU-based cloud networks. The new deal amounts to roughly $830 million in additional revenue over 10 years, Cipher says.

The market clearly loves it. But it’s worth pointing out that this agreement is a pretty good example of the byzantine financial structures that are increasingly accompanying plans for many billions of dollars of spending on the AI boom.

For example, Cipher also announced Thursday that it would be borrowing $333 million to finance an expansion of that Barber Lake data center through a private placement of debt.

That offering will be secured, in part, by the warrants Google received to purchase Cipher common stock worth roughly 5.4% of the company. (Those warrants, by the way, look a lot more valuable today, with Cipher mining up double digits.) Google is also backstopping Fluidstack’s borrowing plans to finance its build-out to the tune of $1.4 billion.

For now, this makes financial sense. Alphabet — one of the most successful companies on the planet — needs the computing power to compete in the AI race. And the quickest way to get that capacity is to essentially cosign leases for the smaller companies taking the lead in that build-out, thereby lowering development costs and helping to bring projects into existence.

But in this deal alone, things get awfully complicated awfully quickly, as Alphabet is essentially the prime customer of, an important debt guarantor for, and potentially a significant owner in Cipher Mining, once it transfers the warrants into an ownership stake of more than 5%.

This isn’t, on its face, a terrible thing. There are precedents for circular funding relationships in industries like aerospace, as it developed from the 1920s to the 1950s.

But financial complexity does have a history of essentially hiding the level and locus of financial risks a system is building up, essentially during periods of heady optimism.

Cipher Mining Signs Additional 56 MW, 10-Year AI Hosting Agreement with Fluidstack

Cipher Mining Signs Additional 56 MW, 10-Year AI Hosting Agreement with Fluidstack

The market clearly loves it. But it’s worth pointing out that this agreement is a pretty good example of the byzantine financial structures that are increasingly accompanying plans for many billions of dollars of spending on the AI boom.

For example, Cipher also announced Thursday that it would be borrowing $333 million to finance an expansion of that Barber Lake data center through a private placement of debt.

That offering will be secured, in part, by the warrants Google received to purchase Cipher common stock worth roughly 5.4% of the company. (Those warrants, by the way, look a lot more valuable today, with Cipher mining up double digits.) Google is also backstopping Fluidstack’s borrowing plans to finance its build-out to the tune of $1.4 billion.

For now, this makes financial sense. Alphabet — one of the most successful companies on the planet — needs the computing power to compete in the AI race. And the quickest way to get that capacity is to essentially cosign leases for the smaller companies taking the lead in that build-out, thereby lowering development costs and helping to bring projects into existence.

But in this deal alone, things get awfully complicated awfully quickly, as Alphabet is essentially the prime customer of, an important debt guarantor for, and potentially a significant owner in Cipher Mining, once it transfers the warrants into an ownership stake of more than 5%.

This isn’t, on its face, a terrible thing. There are precedents for circular funding relationships in industries like aerospace, as it developed from the 1920s to the 1950s.

But financial complexity does have a history of essentially hiding the level and locus of financial risks a system is building up, essentially during periods of heady optimism.

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