The AI Spending Doubt Moved From Lenders To Shareholders

MarketWatch counts three data-center share sales pulled this month and a fourth fell as much as 32% on its first day in Seoul, which is shareholders rather than lenders questioning the artificial-intelligence buildout. Goldman Sachs put numbers on what the money is waiting for, and they are about electricity rather than chips. Oil held near a five-month high after Saudi Arabia postponed the conference it holds to attract foreign capital, and homebuilder confidence fell to its lowest since 2012.

Fast Facts

• Tradeweb Markets agreed to buy the fixed-income trading platform Trumid for about $1.97 billion (Read More)
• Amazon will fund 12 small nuclear reactors with X-energy at a former Indiana coal plant, close to a gigawatt of power (Read More)
• JPMorgan says the initiative Jamie Dimon announced a year ago has financed $230 billion for U.S. supply chains and defense contractors (Read More)
• Netflix is overhauling its creative leadership as it struggles to get U.S. audiences to watch more, hours before its quarterly report (Read More)
• S&P Global warned that the largest cloud companies may be carrying more artificial-intelligence debt than their accounts show, while saying no rating changes were needed yet (Read More)
• The Powerball jackpot rose to $635 million, a headline figure that falls once the winner picks between a lump sum and 30 annual payments and tax is withheld (Read More)

Global News

• German producer prices, what factories charge before anything reaches a shop, rose 6.7% in September from a year earlier, above the 6.2% economists expected (Read More)
• U.K. unemployment fell to 4.7% in the three months to August, and job vacancies fell by 21,000 to 691,000, a level last seen outside the pandemic in 2014 (Read More)
• The interest rate on Japan's 20-year government bonds fell to its lowest since early September after an auction drew the strongest demand on record (Read More)
• Shares in Mynt, the Ant-backed operator of the Philippine payments service GCash, rose as much as 2.4% in their debut after the country's largest share sale (Read More)

A Data Center Listing Fell As Much As 32% On Day One, And Goldman Sachs Named The Bottleneck

Elice, a South Korean company that builds data center infrastructure and sells cloud and education software, fell as much as 32% on Tuesday, its first day of trading in Seoul. It had raised 201.1 billion won ($150 million) selling shares to the public for the first time, priced at the top of its range, to build portable data centers. Others never got that far: three such sales were shelved in October, on MarketWatch's count, backed by Nvidia, Blackstone and SoftBank. The memory-chip maker SK Hynix was heading for its lowest close since April. On Monday the same trade had rallied in New York, where the Nasdaq led gains as chip and artificial-intelligence shares bounced back. The rebound did not survive one Asian session.

Rapunzl's October 16 briefing found this same doubt in the bond market, priced as the cost of borrowing. Tuesday moved it somewhere blunter. A share sale is a company asking the public for money at a stated price, and the public either hands it over or does not. Three sales pulled and a fourth falling that far in its opening hours is the public answering. Professional money said it with positions: hedge funds cut their technology holdings last week at the fastest pace in at least a decade, on Goldman Sachs's data.

Goldman also named what the money is waiting on, in a report shared with Axios that morning: not chips. It expects global data center power demand to rise 170% between 2025 and 2030, against a U.S. grid holding roughly 2,600 gigawatts of proposed generation and storage in line for a connection, more than twice the capacity it has built, and a median wait of about five years from application to operation. Jason Tofsky, Goldman's global head of digital infrastructure investment banking, wrote that "Power is probably the forever bottleneck." Set that beside the financing: Goldman projects $420 billion of global borrowing by the largest cloud companies in 2027, funding roughly 35% of what they lay out on buildings, machines and power. A loan starts charging interest the month it is drawn. A site waiting five years for a connection earns nothing for five years.

Demand itself has not softened. ByteDance, Alibaba and Tencent have ordered more than 3 million of Nvidia's RTX PRO 5500 cards, worth more than $35 billion at about $11,400 each, according to people familiar with the orders, and Nvidia has said it cannot guarantee it can fill them. The computers are wanted. What Tuesday put in question is narrower and more physical: whether the buildings can be powered, and the borrowing serviced, on the schedule the financing assumes.

Sources: Economic Times on the Elice debut · Economic Times on the Asian session · MarketWatch · Axios on the Goldman report · Investing.com on the Nvidia orders · Rapunzl's October 16 briefing

Saudi Arabia Postponed "Davos In The Desert" And Riyadh's Financial District Is Working From Home

Saudi Arabia has postponed the Future Investment Initiative, the state-backed conference known informally as "Davos in the Desert," from its October 26 to 29 dates until 2027. Riyadh government agencies told employees to work from home this week. Houthi attacks have hit military, energy and civilian infrastructure across Saudi Arabia, including King Khalid International Airport in Riyadh on October 8, killing at least 18 people and injuring hundreds. Brent crude futures, which are contracts to buy a barrel on a set date at a price agreed today, rose 21 cents to $109.76 a barrel early on Tuesday, after reaching $110.70 in the previous session, the highest since May 20.

No loss of supply has been reported in any of this. An oil price carries a risk premium, the extra amount a buyer pays because they are not certain the barrel will arrive. Someone who cannot afford to be caught short would rather pay extra now than find out later, which is why a threat to supply moves a price as surely as a loss of supply does. Attacks on shipping in the Hormuz Strait have kept that premium high. Rapunzl's October 19 briefing covered the U.S. decision to waive newly imposed sanctions on Russia, meant to put barrels back into the market and pull prices down. That effect held for one session.

The detail that lands this is not a price. The Future Investment Initiative exists to attract capital to Saudi Arabia, and its expected speakers included Ruth Porat of Alphabet, David Solomon of Goldman Sachs and Laurence Fink of BlackRock. A conference with that job cannot be held in a city whose financial district is working from home: companies in the King Abdullah Financial District asked staff to stay remote, and the Kingdom Centre, a 99-story tower housing the IMF's regional office, asked workers to stay away until further notice. European natural-gas prices rose in early trading, and Rabobank said risks of further price spikes remained high. Traders are weighing all of it against the prospect of more Russian supply.

Sources: Al Jazeera · Economic Times on oil prices · WSJ on Brent and the risk premium · WSJ on European gas prices · Rapunzl's October 19 briefing

Builder Confidence Fell To Its Lowest Since 2012 As Monday's 10-Year Note Stood At 5.15%

Confidence among American homebuilders fell three points to 29 in October, on the NAHB/Wells Fargo index, its lowest since June 2012. Current sales, expected sales and prospective buyer traffic all fell with it. Buyer traffic has fallen to its lowest level since April 2012, excluding the onset of the pandemic in April 2020, NAHB chief economist Robert Dietz said. The average 30-year fixed mortgage ran 7.40% last week, on Freddie Mac's measure, the highest in nearly three years. The last published U.S. Treasury par yield curve, which plots what the government pays to borrow over each span of time, is the October 19 session. On that row the 10-year note stood at 5.15%, up six hundredths of a percentage point on the session before. And in the budget year that ended September 30, the government paid $1.052 trillion in net interest on its debt, more than it spent on defense.

Those two things are linked by one number. A yield on a Treasury note is the price the U.S. government pays to borrow for that length of time, and a mortgage, being a loan that runs for decades, is priced against long-term government yields with the lender's costs and risks on top. Higher yields there, higher quoted mortgage, bigger monthly payment on the same house. On the other side of that market the government is itself the borrower, at scale: net interest is now the third-largest line in the federal budget, behind only Social Security ($1.67 trillion) and Medicare ($1.07 trillion). So one wholesale rate lands on a family deciding whether to buy a house and on a Congress deciding what else the budget can carry. Where it goes next is an expectation and not a result: 71 economists surveyed by The Wall Street Journal now expect higher bond yields for longer, alongside firmer growth and eventual relief on inflation.

Sources: U.S. Treasury · Investing.com on homebuilder confidence · WSJ on builder sentiment · Axios on the federal interest bill · WSJ on the economists' survey

What To Watch

This is the heaviest stretch of earnings season: 55 companies report today, 91 tomorrow and 138 on Thursday. Every figure below is analysts' average estimate for earnings per share, an expectation and not a result.

Today: GE Aerospace at $2.02 against $1.66 a year earlier, RTX at $1.78 and General Motors at $3.55 before the open; Netflix at $0.82 against $0.59, Capital One at $5.45 and United Airlines at $2.60 after the close.

Wednesday, after the close: Meta Platforms at $6.54 against $7.25, Tesla at $0.22 against $0.37, Texas Instruments at $2.40 against $1.48 and IBM at $2.88. Several of them buy or sell the hardware behind today's lead story.

Friday, before the open: American Express at $4.47 against $4.14.

Beyond that:

• The Federal Open Market Committee, the officials who set the country's benchmark short-term interest rate, meets on October 27 and 28, with a press conference on the afternoon of the 28th. Nothing has been decided.
• The Bureau of Economic Analysis publishes Gross Domestic Product and Personal Income and Outlays on October 29.

The Classroom Takeaway

A share sale is one of the clearest lessons a market teaches, because the public is asked to name a price and the answer is public too. Three companies declined to ask this month and a fourth got an answer it did not want. Students can practice that decision, with none of the consequences, in a stock market simulator.