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Market mood is mercurial and jittery (0:20). Cisco vs. Oracle: a split in AI infrastructure plays (0:55). The challenge of high valuations and why Nvidia’s upcoming report is a major market catalyst (3:05). Pharma stocks rally while Bitcoin slumps, signaling declining risk appetite (5:00). Stablecoin growth, higher expenses, and interest-rate pressures on Circle (6:30). Retail surprises, Dillard’s earnings pop (7:40). Missing data concerns, Fed rate-cut odds shift (9:30).
Transcript
Rena Sherbill: Brian Stewart, our Director of News at Seeking Alpha. Always great to talk to you on a Friday. Welcome back to Wall Street Roundup.
Brian Stewart: Great to be here.
Rena Sherbill: It’s great to have you talk to us about what you’re looking at in the market most of all these days.
Brian Stewart: So the market’s gotten a little mercurial lately. It’s still hovering near its highs, but seems pretty jittery. had optimism coming out of the end of the shutdown earlier this week, but then we saw a decline yesterday.
It’s been a mixed bag, I guess you’d say. There’s not really a particular catalyst that’s been driving stocks, it’s kind of a day-to-day thing.
Just as an example of kind of the split that’s going on, we had Cisco (CSCO) rise about 5% after its earnings earlier this week. It was up 3% the previous day, so there was already optimism going into that. It beat expectations, raised guidance, revenue was up about 8%. This included a 15% rise in its networking sector, which is its biggest sector.
So the main driver there was the company also touted a $1.3 billion in AI infrastructure orders from hyperscaler clients. So you see another company that is making a lot on these other companies that are building out their AI infrastructure.
On the other side of the spectrum, you have Oracle (ORCL), which was down about 10% in the past five days. Stock is down 55% from its peak in September.
It was up 97% year to date at that peak and now it’s up 33%. So still showing a pretty strong gain for 2025, but has come down dramatically lately. There’s no major catalyst for Oracle, but there is growing worry about the spending at these hyperscaler companies.
What has become known as the depreciation tsunami, you had Michael Burry, the Big Short investor kind of banging the drum this past week about that. Basically, the idea is that these companies are inflating earnings by spreading out the depreciation much further than would be justified.
There’s evidence that the chips that are being used for this AI burn out pretty quickly, so you have to replace them. So if you’re a company like Meta (META) and you spent $15 billion in the past quarter on R&D, which a lot of that is the AI infrastructure build out, that’s not a one time expense, not like you buy that this quarter and then you have it for 20 years.
You have to replace those chips along the way. And so the worry here is that eventually these companies are going to have to bring the accounting into the reality. And you’re going to see that come out as kind of an event that might burst what some people are calling an AI bubble.
So that’s the worry. And you saw that worry kind of becoming reality in the stock market this week with Oracle down and Cisco up. So you see sort of the split between the buyers and the sellers in this AI infrastructure build out.
Rena Sherbill: And what would you say about what investors should be paying attention to earnings wise given Burry’s warning call and given others concerns? What would you say should be top of mind for investors as they assess future earnings?
Brian Stewart: So the big one next week is Nvidia (NVDA). I think that’s a huge data point. It’s hovering maybe 10% off of its highs. So still holding gains that it saw earlier in the year. I think it’s up about 40 % year to date.
The main argument for a company like Nvidia, Nvidia is the infrastructure provider. It’s sort of in the Cisco category where it’s selling chips to these hyperscalers. So in the dichotomy that I described, Nvidia should be on the right side of that line.
The only issue is that valuations for all these companies are so high, the question becomes whether the growth is going to match the expectations. As we saw with some of the tech earnings earlier in this cycle, a lot of investor concerns are moving beyond sort of a quarter by quarter tally and looking into, you know, now 2026, but even further 2027, end of the decade because valuation’s so high, basically you’re pricing in growth of the levels that we’ve seen for four, eight, 12 quarters down the line.
And so any sign that that’s not going to materialize can affect the stock price. you’ve got a investment horizon that’s far with these valuations that people really are parsing what people are saying in conference calls and information in the press release and any kind of shading of the outlook slightly can cause a major change in the stock price.
Rena Sherbill: What else is top of mind for you stock wise?
Brian Stewart: Well, there were some interesting aspects in the market last week. I think it’s always helpful to kind of move beyond the technology names that we’ve been talking about completely and just sort of see what the rest of the market is doing.
And so on that front, the farmer stocks had a really good week. The Van Wick, excuse me, the Van Eck Pharma ETF (PPH) was up about 4% the last five days. This included a 7% rise in Lilly (LLY), an 8% rise in Merck (MRK).
So this might be a sign of investors becoming more defensive. There really wasn’t a particular catalyst driving the market last week. So you might be seeing some money pulling out of companies like Oracle and going into areas of a little bit more defensive.
On the same front, sort of the opposite side of that spectrum, you saw a further decline in Bitcoin (BTC-USD). Bitcoin is now close to 96,000, down about 24% from its high, hitting its lowest level since May.
So it’s reversing gains that it saw since the middle of the year. And as we talked about before, the crypto market is sort of the leading edge of speculative investments. So it’s interesting to see stocks like pharma stocks getting interest while you see assets like Bitcoin going down. It suggests that the risk appetite for investors is starting.
Rena Sherbill: And what would you say about Bitcoin related names these days?
Brian Stewart: Well, one interesting one isn’t directly Bitcoin related, but just sort of crypto in general as we saw Circle (CRCL) report its earnings. It beat expectations. Revenue is up 66 % from last year. Stablecoin circulation was up to almost $74 billion. However, and this is another victim of the higher expenses situation, it raises operating expenses.
The stock dropped 12 % after its earnings. Another issue it had is it’s been hurt by lower interest rates. It gets a lot of its its revenue from the interest income on the assets that it uses to back its stablecoin. So with interest rates low, it gets less revenue from that. It’s interesting to see a stock that’s sort of seen as sort of this tech bastion being affected by one of the most primal investment, the thing that’s seen as sort of the base investments, bonds.
So I found that an interesting dynamic. again, you have a stock that’s beyond the interest rates is worried about expenses. So a further example of what we’ve been talking about in terms of the stocks that are buying and the stocks that are selling AI and other infrastructure.
Rena Sherbill: Anything else stock wise to highlight for listeners?
Brian Stewart: Another interesting sort of off the beaten path, or at least off the technology path is Dillard’s (DDS), the retailer, it jumped 10% after its earnings hit a new high beat expectations. Also saw margins improving, which is a good sign in a situation where these retailers are dealing with tariffs, it’s just a company that’s been sort of blocking and tackling and getting the job done, in a less than ideal marketplace. So it’s an interesting highlight.
It’s also interesting to highlight because next week there are a lot of retailers coming out. I believe Home Depot (HD), Lowe’s (LOW), Target (TGT) and Macy’s (M) another department store chain coming out later in the week. You have a retailing theme coming next week and Dillard’s hopefully if your retail investor is a positive starting point.
Rena Sherbill: What else would you add to the earnings for next week? You mentioned Nvidia, what else would you add to that conversation about next week for earnings?
Brian Stewart: Like I said, there’s a bunch of the retailers. Walmart (WMT), I didn’t mention, is also coming out next week.
And you also have some Chinese EV makers. So (NIO) and XPeng (XPEV) are coming out. That, especially with Tesla (TSLA) being a high profile stock, one that can certainly move the overall market, their commentary about the overall marketplace and EVs might be extremely important.
And then I already mentioned them at Home Depot, Lowe’s, beyond being retailers, they’re also good proxies for the housing market in general. We saw some data recently that said that foreclosure starts were up 20% in October compared to last year.
So that’s kind of a disturbing statistic for the housing market. And so I think Home Depot and Lowe’s will give some good commentary about that.
Rena Sherbill: Just in time for Burry’s hedge fund to close for a second time. Or I guess this iteration it’s the first time closing, but I think people know what I mean.
Broadly speaking, we saw the end of the government shutdown. What would you add to that conversation and what else macro-wise are you seeing?
Brian Stewart: Yeah, I think for stocks, the end of the shutdown is generally positive. You know, that’s that’s money coming back into the system. It’s a layer of uncertainty that’s removed.
One aspect that might be harmful for the stock market, though, is it’s not clear what data we’re going to get for October. So the White House came out and said we probably we’re not going to get CPI and jobs data. Then we got pulling that back a little bit that we might get for the jobs data, we might get the number of jobs created, but not the unemployment rate.
Basically during the shutdown, they weren’t gathering data under the normal circumstances. So there might not be the data to present for October. So there might just be a month that’s missing forever, which leads to the situation where when the November data comes out early next month, that we might be in for a big surprise.
Like we discussed last week, the latest Challenger report showed that layoffs were significantly higher. I think it was 175% higher this October compared to last October.
That fits what we’ve been seeing from companies who have been announcing layoffs. Verizon (VZ) had a major layoff that they were preparing. There were reports about that this week. We had seen Amazon (AMZN) earlier. There’s general concerns about the build out of AI eliminating full sectors of jobs.
So you have a situation where all these factors are compounding a soft economy, a longer term structural change that makes human power less important. And so it’ll be interesting to see once that data comes back online exactly what’s going on in the economy.
Which plays into this this week was you saw the chances of a Fed rate cut. So right now, the next Fed meeting, which is in December, is basically looking at a 50/50 shot that we’re going to get another rate cut from that meeting. That’s down from about 67 percent a week ago and down from about 94 percent last month. So you have a situation where the market is now starting to price in the idea that the inflation situation is not going to allow the Fed to cut rates as aggressively as had previously been hoped, which could be a dangerous situation if the economy is also starting to soften a bit and the Fed has its hands tied in terms of cutting rates.
Rena Sherbill: Lots of TBDs still, but signs may be forming a little bit clearer, would you say?
Brian Stewart: Yeah, I mean, the recent headline economic data has been worrisome. Like I said, we’re we’re living in a world where we don’t we’re not getting as much data as we normally do. So when that starts to come back online in a couple of weeks, we’ll sort of see where we’re at.
I think that’s a good way to think about it. Like the market right now is in sort of a wait and watch situation. We haven’t seen it fall off a cliff. There doesn’t seem to be massive concern, but it does – like I said at the beginning – feel very jittery in a way that you could see a sell-off, with one key piece of information going the wrong way could poke it.
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