Oil Hits 5-Month High, iPhone Duo Launch, Weekend Sports Slate 10/23/26

Jason Greenberg · Jefferies

Data center buildout is a cost-of-capital shakeout; stronger business models survive, not the whole group.

Greenberg says hyperscalers such as Google and Meta have turned free-cash-flow negative, so companies that funded themselves for years now need outside financing. Investors and lenders then weigh a hyperscaler against an emerging neocloud provider. He treats data centers as capital plays where the return has to beat the cost of capital. The coming shakeout will separate companies with real customer demand and lower-cost capital from the rest. He does not expect every data-center stock to fall.

“I think at the end of the day, data centers are capital plays. It's what's the cost of capital relative to what's the return I can get. I think it's a healthy market where you see it shaking out individual stocks. I don't think it's a all stocks are going to get go down in that space.”at 7:34

Ohsung Kwon · Wells Fargo

Neoclouds are probably the weakest link as capex growth slows and capital markets push back on financing.

Kwon says the market is entering a phase of decelerating capex growth and a decelerating semiconductor EPS cycle. Strong-looking, low-quality stocks with the most torque were the winners on the way up, but this phase exposes weak hands. Neoclouds are the weakest link. Capital markets are already pushing back on financing, and that pushback falls hardest on neocloud providers that depend on debt-funded capex.

“When things are starting to decelerate, it's going to expose a lot of weak hands, and I think neo clouds are probably the weakest link in the system.”at 31:35

Ohsung Kwon · Wells Fargo

Higher hyperscaler capex is no longer a bull case; markets want capital discipline and slower spending.

Kwon says higher capex drove semiconductor stocks higher for two years, but that era is over. Capital markets are pushing back on financing, and more capex means more debt issuance. Compute pricing is backwardated: spot prices sit well above long-term contract prices, and companies are signing deals at high spot-level rates that are likely to fall. More hyperscaler capex means more future supply and weaker pricing power. The market wants signs that the capex cycle will eventually slow and that supply is being managed. That discipline could extend the cycle for semis.

“I don't think higher CapEx from here is a bull case from hyperscalers. I think it's really capital discipline. ... Well, I think those days are over.”at 32:00

Helima Croft · RBC Capital Markets

Hormuz oil flows come at extortionate shipping and military cost, and ships are still targeted, so transit isn't smooth.

Croft says the debate about whether Hormuz traffic is near pre-war levels misses the cost. Shipping costs to move those barrels are extortionate. US military resources are a heavy burden on CENTCOM forces. Companies operating in the Gulf report that their ships keep being targeted and people are dying. Even though physical volumes have increased, the passage is far from smooth.

“The question I keep asking is at what cost? If you look at the the shipping cost to move those barrels, it's extortionate. If you think about The US military resources that are being used to move those cargoes, huge burden on CENTCOM forces.”at 19:56

Helima Croft · RBC Capital Markets

Substantially more Russian diesel exports depend on Ukraine halting refinery strikes and on sanctions policy.

Croft says Trump pulled back sanctions on Russia and announced an energy ceasefire that has not taken effect. Significantly more Russian cargoes would require Ukraine to agree not to target Russian refineries. Ukraine is still hitting that infrastructure, so she doubts a plausible path to much higher diesel exports. Republicans unhappy with the sanctions pullback could push to tighten the sanctions architecture after the midterms, including by removing the national-security waiver the White House holds.

“The question is, would we be talking about significantly more cargoes in this pullback of sanctions situation if we had Ukraine agreeing not to target Russian refineries?”at 21:27

Alex Sherman · CNBC

MLB owners will likely lock out and push a salary cap over competitive-balance problems.

MLB's collective bargaining agreement expires at the end of the year, and a lockout with a push for a salary cap is described as a foregone conclusion. The owners' main argument is competitive balance: MLB is the only major American league without a salary cap, so big-market teams can outspend small-market ones, with the Dodgers the main culprit. The Dodgers' elimination weakens the owners' optics, since the World Series features Milwaukee, roughly the 19th-largest spender, and Tampa Bay, one of the lowest spenders, instead of the Dodgers, which would have made the case more visible.

“the Major League Baseball collective bargaining agreement is up at the end of the year, and it's sort of a foregone conclusion that the owners are going to lock out and push for a salary cap.”at 42:17

Alex Sherman · CNBC

Brewers-Rays World Series ratings likely below Dodgers-era levels, possibly among the lowest ever.

The last two World Series featuring the Dodgers each averaged more than 15 million viewers, well above the previous two without them, when Texas (2023) drew under 10 million and Houston about 12 million. Without the Dodgers, he expects the Brewers-Rays series to land near the 2022-2023 levels, or somewhat lower. If it comes in lower, it could fall into the range of one of the lowest-rated World Series ever. He notes that both teams are strong, which partly offsets this.

“the last two world series that the dodgers have played have both averaged more than 15,000,000 viewers. That is much higher than the previous two world series that did not have the dodgers in it.”at 43:27

Jason Greenberg · Jefferies

Investors wrong to fear AI agents replacing software; AI mostly makes software companies better, not obsolete.

Greenberg argues the spring sell-off in application software was a mistake. Foundation-model companies building products directly, or individuals vibe-coding their own tools, lower the bar to creating a product but not to deploying, integrating, securing, complying with regulation and maintaining it. Disintermediation hits only firms with little lock-in, little proprietary data and simple workflows. Other software companies are using AI to make their products cheaper, more capable and better. He also says money is rotating out of chips and data-center infrastructure into application software, which investors had written off six months earlier.

“I think investors did and continue to get software wrong. The idea that software is going to get replaced by agentic AI software, get disintermediated by foundation model companies building things direct. ... It's actually lowering the bar to creation of product development, but it's not changing the ability to deploy it, to integrate, secure,”at 4:02

Jason Greenberg · Jefferies

IPO window is resetting: poor post-IPO returns, rich valuations and higher rates deter listings, but companies will still come.

Greenberg explains why companies are holding back IPOs even with markets near highs. Many recent IPOs have not made money for buyers, so investors wait. Valuations for AI-related companies have run ahead of what investors will pay, and a large amount of supply is chasing limited capital. Higher capital costs, with the 10-year yield and inflation up, add to the reset. He says this changes the pace, not the number of companies. Passive index funds now take about 40% of demand for public stocks and mostly track large companies. Reporting, litigation and disclosure costs of being public also make small companies less likely to list, while private markets have plenty of money.

“if you're not going to make money on an IPO, you'll stand back and wait... I think to some degree valuations have gotten ahead of themselves in terms of what people are asking. ... I think all of those together are making it a little bit of a reset, but I don't think that changes the number of companies.”at 5:44

Jason Greenberg · Jefferies

Very optimistic on AI; productivity gains will come even if foundation models stopped improving today.

Greenberg says he is very optimistic about what AI is doing. His test: if foundation models stopped improving for ten years, productivity would still grow over that decade, because the constraint is deployment. The rate of technology change is outrunning companies' ability to deploy it, so return on investment takes time as corporations change how they work.

“I'm wildly optimistic about what AI is doing in general... if you told me tomorrow that none of the foundational models got any better for the next ten years than they are today, I think you'd see productivity growth for the next ten years.”at 8:47

Helima Croft · RBC Capital Markets

Low Europe gas storage and Hormuz risk could drive a bidding war for uncontracted US LNG cargoes this winter.

Croft explains the split: US natural gas is cheap because the country is a large producer and exporter, and prices already reflect possibly warmer weather in November. Europe's storage is well below normal for this time of year. A significant escalation in the Middle East could cut off hopes of extra Qatari supply through the Strait of Hormuz. Qatari LNG mostly goes to Asia, so uncontracted US cargoes could be fought over by Europe and Asia. Europe could face a difficult winter without weather relief.

“But if you talk about Europe, as you just mentioned, European storage levels are well below where they should be this time of year. If we have significant escalation in The Middle East, we can basically take away any hopes of getting more supply from Qatar through Strait Of Hormuz.”at 17:55

Ohsung Kwon · Wells Fargo

Turned cautious on semis; semiconductor EPS growth is decelerating, so the AI build-out trade is weak.

Kwon's team turned cautious on semiconductors heading into September and has been negative on the AI build-out trade for two months. The core reason is that the semiconductor EPS cycle is decelerating along with capex growth. He expects money to rotate from chips toward AI applications, hyperscalers and software, which he sees as better positioned than semis.

“We turned cautious on semis especially heading into September. So we've been pretty negative, the AI build out trade for the past two months.”at 30:30

Ohsung Kwon · Wells Fargo

Earnings growth decelerates in 10 of 11 sectors over the next few quarters; only health care accelerates.

Kwon expects the overall earnings cycle to decelerate for the next few quarters. Ten of the eleven S&P sectors will see slowing growth, and health care is the only one with accelerating EPS. That makes health care a defensive sector that is already attracting flows.

“the earnings cycle overall is going to be decelerating for the next few quarters. 10 out of 11 secondtors, they're gonna see decelerating growth except health care. So health care is gonna be the only sector with acceleration in EPS”at 31:04

Ohsung Kwon · Wells Fargo

Health care services look more attractive than pharma and biotech, the sector's only EPS-accelerating part.

Kwon says the services side of health care, meaning not pharma or biotech, is becoming more interesting. Health care as a whole is the only sector with accelerating EPS, and it is defensive, with flows moving into it. Pharma and biotech have already benefited from outflows from semis. His sentiment indicator has flagged that group as extremely bullish, which he treats as a sell signal, so the services side is the more attractive part of the sector.

“I think the services side, so not pharma, not biotech, those side of things within health care is starting to look more interesting.”at 34:46

Ohsung Kwon · Wells Fargo

Pharma and biotech sentiment is extremely bullish and has flashed a sell signal, so the group looks stretched.

Kwon says pharma, biotech and life science have benefited from outflows from semiconductors. His sentiment indicator has triggered a sell signal for the group, which means it has become extremely bullish. He notes that this is not a good signal for the group, so he prefers the health care services side.

“pharma, biotech, and life science, that group has triggered a sell signal, meaning it's gotten pretty extremely bullish, so that's not necessarily a good signal”at 35:07

Jerome Schneider · PIMCO

Market is questioning tech profitability, shifting investors from equity upside toward bond downside protection.

The Nasdaq and the 10-year Treasury yield have moved in lockstep over recent months, and AI stocks sold off as investors fled to safety. He argues that the market is beginning to question tech profitability in general, and that the tech sector is still working out where long-term profitability will come from, given the tech buildout. That uncertainty is refocusing investors from equity upside potential toward the downside protection fixed income offers, even though the economy is doing well.

“the market's beginning to question some of the profitability metrics in general... The tech sector is really understanding and trying to understand and discern where the ultimate long term profitability is, and that is refocusing the market from upside equity potential to the downside protection that fixed income offers”at 38:08

Jerome Schneider · PIMCO

Bonds offer real, inflation-beating yields and could return 6-8% this year; a generational income opportunity.

Rates are no longer at the zero bound, so bonds now pay nominal income and real returns above inflation, more than 2% in most cases and still attractive even against inflation prints around 3%. Bonds also offer price upside: yields fell as risk-off concerns hit equities yesterday and bond prices rallied. He frames bonds as a hedge against geopolitical risk, inflation, monetary policy and doubts about the tech buildout. He hedges that no one can call where yields go, but argues that even if yields rise from here the starting point still yields positive returns, roughly 6-8% total return over the year, comparable to equity-like returns over the longer term. He calls it a generational opportunity to diversify into income assets.

“Think about bonds as being in the range of a six to 8% total return over the course of the year.”at 40:13