AI Stocks Crack, Yields Fall, Defensives Surge; What’s Next | Cameron Dawson

Micron Technology

Across the shows: 13 speakers in other episodes, 10 bullish and 4 bearish calls, past 30 days

• Cameron Dawson · NewEdge WealthBearish

  Micron's 2027 demand looks locked in, but consensus still assumes flat 2028 margins that look too high.

  Micron has said it is booked out and locked in for 2027, so near-term demand is not the worry. But current consensus still models 2028 margins staying at peak levels. Micron's operating margin is around 85-90%, which she calls the definition of supernormal profits, and economics says those profits do not last. Once the market starts questioning 2028, it will reprice forward multiples and earnings, so the risk sits in the out-year margin assumptions.

  “Micron has told us effectively that they're booked out, they're locked and loaded. But if you have questions about 28, and if you look at current consensus, it still is pricing in that 28 margins stay the same.”at 17:38

Alphabet

Across the shows: 15 speakers in other episodes, 12 bullish and 5 bearish calls, past 30 days

• Cameron Dawson · NewEdge WealthBullish

  Google's net cash means higher rates won't stop it from funding data-center buildout.

  Google has negative net debt, meaning more cash than debt, so higher interest rates are not likely to stop it from issuing bonds to build data centers. The capital-markets risk is indirect, though: Google's cloud growth relies on AI labs like Anthropic, whose own ability to raise capital could limit the demand Google is building for.

  “The reality is that Google has negative net debt, has more cash than it has debt.”at 20:11

US stock market outlook

• Cameron Dawson · NewEdge Wealth

  Price leads data, so weakness in financials and chips could mean the market rolls over before earnings do.

  She has argued for three years that the market can keep making highs while twelve-month forward earnings estimates are at new highs. Price is a leading indicator of data, so when financials and semiconductors weaken, the market can start to fall before earnings estimates turn. The current weakness in those sectors is the signal she is watching, and the market's behavior is what she trusts over the earnings data.

  “as long as twelve month forward earnings estimates are making new all time highs, we think the market can make new all time highs.”at 1:05

• Cameron Dawson · NewEdge Wealth

  Market breadth is very poor: about 40% of S&P 500 stocks are 20% off highs while the index is near highs.

  About 40% of S&P 500 stocks are down 20% or more from all-time highs, yet the index is only about 2% below its high. She reads this as a have-and-have-nots market in which a small group of leaders hides broad weakness. She had hoped that oversold equal-weight and bank stocks would bounce going into earnings, but they failed to, which points to weak internal health.

  “almost 40% of the S and P 500 is down 20% from all time highs, and yet the market is down just about 2%... it's very much a have and have nots kind of market.”at 10:41

• Cameron Dawson · NewEdge Wealth

  Utilities and staples leading the market signals deteriorating risk appetite, not a risk-on rally.

  Utilities and consumer staples have been rallying, and she calls them the most prototypical risk-off sectors. Their leadership typically signals falling risk appetite and more caution about growth. She notes the utilities selloff earlier was indiscriminate and tied to rising yields, and the rotation into defensives is what usually happens when investors start to worry about earnings from higher rates. She does not forecast a deep bear market, only that the leadership is a warning sign.

  “And those are not risk on sectors. Those are your most prototypical risk off run for the hills, under the sheets kind of sectors.”at 11:53

• Cameron Dawson · NewEdge Wealth

  The stock market could roll over before earnings do, given weak financials and semiconductors.

  Cameron's framework is that price leads data. He has long said that as long as twelve-month forward earnings estimates make new highs, the market can make new highs. He says that mantra will eventually run its course. Given weakness in financials and semiconductors, he is now more open to the market breaking down before earnings do, which would change the playbook.

  “we think the market will break down before earnings break down because that's how it plays out.”at 40:15

• Cameron Dawson · NewEdge Wealth

  Defensive sectors leading the market is a warning sign of more weakness elsewhere, so investors shouldn't cheer it.

  Utilities and staples are outperforming, but Cameron notes they were the market's worst performers and became oversold, so they now offer cheaper safety. He argues the usual rotation into defensives is a harbinger of more weakness in other parts of the market, so this leadership should not be cheered.

  “But again, they're the defensive sectors, right? So what you typically see as a rotation, the defensives did so poorly. They were absolute losers, oversold. ... So we shouldn't be cheering for utilities and staples to lead. Usually, it's a harbinger of a lot more weakness in other places.”at 40:50

• Cameron Dawson · NewEdge Wealth

  Financials' price action is disappointing after summer leadership, so Newedge must re-underwrite the sector.

  Financials were leaders through the summer, and Cameron's team had been patient with them while they were oversold at trend. He says the sector's weak price action has been disappointing and that the team needs to keep re-underwriting its position, a sign that the sector is under pressure.

  “we're really disappointed in in the price action of financials. You know, they had been leaders through the summer, thought, okay, we'd be patient with them, oversold at trend. That's been an area where we certainly need to continue to re underwrite that.”at 41:36

US rates & the Fed

• Cameron Dawson · NewEdge Wealth

  Fed tightening enough to get inflation to 2% would hurt households holding more equities than home equity.

  Aggregate financial conditions are still easy, so the Fed would need to tighten them broadly to bring inflation back to 2%, which it has not done. Tightening through equities would hit households, because US households now hold more net worth in equities than in homes and have more equity exposure than in 2022. A broad tightening would therefore be a Pyrrhic victory, and she doubts the Fed will follow through all the way, while noting parts of the economy may already be too tight.

  “So if you really were to tighten financial conditions, which would we think result in more equity volatility and poor equity returns, you would be directly hurting households, which now have more of their household net worth in equities than they do than homes.”at 27:05

• Cameron Dawson · NewEdge Wealth

  A Fed hike in October is in play; the two-year yield is pricing more hikes than Williams' one-more-hike view.

  Before the CPI release the two-year yield was about 4.77%, pricing roughly three more hikes over two years, and after the hot print it moved close to 5%. Williams' view of one more hike and then done does not fit with that. The only time the two-year was this wrong to the upside was 1994, when the Fed stopped because something broke (Orange County and Mexico) and equities weakened. That is the kind of break that would stop the Fed now. She will firm up her October view after PPI the next day, which she expects could come in hot.

  “Look, I think October's in play after this data. I would make my final statement on that after PPI tomorrow”at 27:36

• Cameron Dawson · NewEdge Wealth

  Liquidity-sensitive assets cracked before the 2022 hikes, since markets price tightening before it happens.

  In the 2022 tightening cycle, highly liquidity-sensitive assets such as Bitcoin, SPACs and speculative stocks cracked at the end of 2021, before the Fed started raising rates. Cameron says it was the anticipation of tightening that began to move markets, so the liquidity tide started leaving early. He uses this to frame what could break in the current cycle.

  “Highly liquidity sensitive things like Bitcoin, SPACs, speculative stocks, all of that stuff cracked at the end of twenty one before the Fed even started tightening, but it was the anticipation that two years started to move. So the liquidity tide started to leave.”at 38:32

Credit markets

• Cameron Dawson · NewEdge Wealth

  Widening high-yield spreads mean growth fears are building and make a sustained equity rally hard.

  CCC spreads have been widening all year, and that weakness has now spread into broader high yield. Spread widening means credit investors want more compensation for lending to risky borrowers, which usually signals brewing growth fears. The move is not cataclysmic and is well below the peaks of Liberation Day or 2022. Still, if spreads keep widening, equities cannot keep rallying meaningfully, because stocks and credit are diverging and that divergence usually does not last.

  “if you continue to see credit spreads widen, it really makes it hard for equity markets to continue to rally in a meaningful way. That divergence is usually unsustainable.”at 14:50

• Cameron Dawson · NewEdge Wealth

  High-yield and CCC spreads are widening, and credit stress may climb up the capital stack into broader weakness.

  High-yield spreads are starting to widen, with CCC spreads leading. Cameron compares the process to a monster climbing the capital stack: stress starts in the lowest-quality credits and moves up through higher rungs until weakness shows up more broadly. He says the key question is how serious the Fed is about tightening financial conditions, which determines how concerned investors should be about this cascade.

  “CCC spreads, as I mentioned, high yield spreads are starting to widen out. And the question is, you think of it kind of like this kind of monster climbing up the capital stack, and it starts at the very bottom of the capital stack in the lowest quality rungs of things and starts to move up higher and higher until you start seeing more weakness in a broader way.”at 38:47

US inflation

• Cameron Dawson · NewEdge Wealth

  Food and energy inflation is starting to spread into other parts of the economy.

  Headline CPI rose 3.7% on gasoline, but she sees signs that the inflationary pressure from food and energy is spreading into other areas. PPI, due the next day, matters because some of its components feed into PCE, which the Fed will not see until after its October meeting. She wants PPI to show whether broader inflation is building before concluding the Fed must act.

  “There are signs that the inflationary pressure from food and energy is starting to metastasize in other areas of the market.”at 24:13

• Cameron Dawson · NewEdge Wealth

  Wages are lagging, and prices outpacing wages could mean a wage-driven inflation problem later.

  So far wages have not been a source of inflation despite a full-employment labor market. Neil Dutta of RIMac points out that wages are a lagging indicator, so they could start to pick up and create a deeper inflation problem. Prices are still rising faster than wages, which explains weak consumer sentiment. The risk is that wage growth catches up later, not that it is already driving inflation.

  “wages are a lagging indicator. So we could be in an environment where wages actually do start to pick up, and then we actually have a deeper inflation kind of issue”at 30:25

US consumer

• Cameron Dawson · NewEdge Wealth

  Rate-sensitive consumer credit is deteriorating, but fixed-rate mortgages keep housing delinquencies contained.

  Pockets of the economy are under pressure from short and long rates: credit card and auto loan delinquencies are rising. Housing is different because about 90% of US mortgages are fixed rate, versus about 35% floating before the GFC, when people were priced out of their homes. As a result, housing delinquencies are not rising the way they did before the financial crisis, so the stress is concentrated in consumer credit.

  “The Fed might be too tight for some portions of the economy. Certainly we've seen things like credit card go up, auto loan delinquencies go up.”at 24:58

• Cameron Dawson · NewEdge Wealth

  Higher rates act as income for top-of-K households, which can offset the squeeze on lower-income consumers.

  The economy is K-shaped: low-income consumption has recovered, but high-income and wealthier households hold lots of cash, carry no big credit card balances, and have fixed-rate mortgages. Higher rates therefore boost their interest income, which acted as stimulus in the 2022 to 2023 hiking cycle because companies and households had termed out their debt. Higher prices can offset this, but the top of the K benefits from rising rates.

  “But we do know that at the top of the K, high income earners, as well as wealthier people sit on a lot of cash and they actually like higher interest rates.”at 36:48

US Treasuries & yields

• Cameron Dawson · NewEdge Wealth

  The 10-year could reach 6% but not in a straight line; bonds may rally if equity weakness drives buying.

  She respects John Roque's chart view that the 10-year is heading to 6%, though parabolic moves are less sustainable than gradual ones, so the path will not be straight. Bonds are now much cheaper relative to equities, which improves the risk-adjusted case for bonds. A relief rally in yields is possible if equity weakness pushes investors out of expensive, volatile stocks into bonds. Yields have risen so much partly because equities have not given investors a reason to flee to safety.

  “...deeply respect somebody like John Roque over at 2250, who's been saying 6% on the tenure, that's what the chart is telling you. And that doesn't mean 6% in a straight line.”at 32:20

• Cameron Dawson · NewEdge Wealth

  Long-end yields are driven by supply, demand and Fed credibility, shown in term premium rather than breakevens.

  Further out the curve, yields become more sensitive to supply and demand and less sensitive to policy rates, while two-year yields respond to policy expectations. Fed credibility on inflation can still feed into long yields. If investors fear fiscal profligacy and a Fed that will not respond, that shows up in breakevens or term premium. Breakevens have not risen this cycle, so the pressure is showing up mostly in compensation for holding longer-dated debt. She says the Fed still affects long yields through financial conditions and QE.

  “the further you go out the curve, the more sensitive the yield is to supply and demand factors and the less sensitive it is to policy rates.”at 34:30

AI bubble & tech valuations

• Cameron Dawson · NewEdge Wealth

  Chip stocks had a blow-off top in May and June; the July correction and current breakdown look like distribution.

  She uses Jeff DeGraaff's (RIMac) technical definition: a stock doubling in under two years counts as a bubble, followed by a typical correction. Chip stocks did this in May and June. Strong trends retake prior highs or the 50% retracement quickly, while weaker ones go sideways and then break support, which signals a distributive top. The KOSPI is oversold and a bounce is possible, but that may not persist. Fundamentals are still improving, since earnings estimates are rising, so she treats the technical signal as a warning rather than a call.

  “And the key message on that one is that back in May and June, we had a full blow off top bubble.”at 4:57

AI chips & semiconductors

• Cameron Dawson · NewEdge Wealth

  Chip-sector margins are stretched; S&P 500 margin gains rely on semis, so a demand slowdown would hit margins.

  Semiconductor index EBIT margins rose from about 16% in 2025 to 42% in 2026, and estimates have them rising to 49% next year. Semis drove most of the S&P 500's margin expansion this year (about five points), and the Street expects another two points next year from semis. Semis are about a 19% weight in the index, so if demand slowed, the index's margins could come under pressure even while average earnings stay healthy. She stresses this is not her forecast, but that markets respect the price action and the risk should be watched into 2027.

  “So we could be in a world where we look at average earnings, they're still healthy, average margins are still healthy, but the S and P five hundred's margins actually come under pressure because semiconductors are a 19% weight.”at 10:00

AI infrastructure & data centers

• Cameron Dawson · NewEdge Wealth

  Hyperscaler capex growth from 2027's expected 30% will decide whether AI infrastructure stocks can keep rising.

  Hyperscaler capex went from expected 0% growth a year ago to roughly 100% growth this year, which explains the big upside for chip and AI infrastructure names. The next-year estimate is about 30% growth. Hyperscalers are building capacity because cloud demand is strong, and that demand depends on AI labs like Anthropic and OpenAI continuing to raise capital to grow. If that funding strains, the chain from lab demand to cloud to data-center spending to chip earnings could break, so the 2027 capex growth figure is the key variable to re-underwrite.

  “So next year, the estimate is 30% growth. And I think that what happens to that 30% growth forecast is really going to be the determinant as to whether or not these bull market and AI infrastructure names can sustain for another year.”at 21:58

Middle East & Iran

• Cameron Dawson · NewEdge Wealth

  The Iran war's supply shock is why the Fed now has to consider hikes instead of holding.

  Without the Iran war, an exogenous policy shock, the Fed would probably have held steady, and markets would not be pricing hikes. The Fed normally looks through supply shocks, but when a supply shock recurs each year and could spread into other parts of the economy, it has to act. The shock is why the rate outlook has shifted from expected cuts to possible hikes.

  “The funny thing about this though, is that we probably wouldn't be having this conversation if it wasn't the Iran war, kind of an exogenous policy shock and all of this.”at 29:38

Market sentiment, positioning & volatility

• Cameron Dawson · NewEdge Wealth

  Downside protection is cheap because the VIX is suppressed and investors are buying calls, not puts.

  The VIX has been very suppressed, with heavy call buying and very little put buying. Cameron argues this makes certain forms of portfolio protection cheaper than expected, given the weakness under the surface of the market. The market has been stable at the index level, so people had little demand for downside protection a week ago, which he finds interesting.

  “things like the VIX have been super suppressed, a lot of call buying activity, very little put buying. ... which just means that certain kinds of portfolio protection are cheaper than maybe you would expect given all the weakness under the surface,”at 42:02