APPLE stock is falling -4% following its earnings: Apple, $AAPL, delivered a mixed Q3 2026 performance, with strong iPhone and Mac sales offset by weaker results across several other businesses and tightening margins. Total revenue reached $114.5 billion last quarter, beating the $113.5 billion consensus, while EPS came in at $2.10 above expectations of $2.00. iPhone revenue rose to $57.6 billion, exceeding the $56.5 billion estimate, while Mac revenue reached $10.8 billion, above the $9.7 billion consensus. However, iPad revenue of $6.23 billion missed expectations of $6.9 billion, while Wearables, Home and Accessories generated $8.3 billion, below $9.0 billion expected. Services revenue of $31.6 billion was in line with the $31.58 billion consensus. Meanwhile, Greater China revenue reached $17.5 billion, missing the $18.75 billion estimate despite strong YoY growth. Looking ahead, Apple expects holiday-quarter revenue growth of 7%-10%, above Wall Street's 6.1% forecast. However, Apple guided for gross margins of 45%-46% in its December quarter, BELOW the 47% consensus, as higher memory costs and expenses related to the new Siri AI assistant weigh on profitability. Higher memory costs and rising AI-related expenses are putting increasing pressure on Apple's margins.

Hedge funds are AGGRESSIVELY cutting their US tech exposure: Hedge funds dumped Magnificent 7 stocks in 4 of the last 5 trading sessions, adding to selling pressure across the US tech sector. $XLK $MAGS $QQQ Over this period, the group has declined -3.6% to its lowest level since late August. Furthermore, hedge funds sold -$20 billion in technology stocks over the last 2 weeks, while 5 consecutive sessions of AI-stock sales erased cumulative net purchases dating back to early 2025, according to Goldman Sachs. Since the October 13th peak, Magnificent 7 stocks are down -8.1%, putting them on the verge of a technical correction. Meanwhile, hedge fund exposure to the Magnificent 7 as a % of total US equity exposure remains near its highest level on record. This suggests there is still plenty of room for further unwinding.

Investors are dumping US Neocloud stocks at a furious pace: The Roundhill Neocloud ETF, $NCLD , is down -32% since its August 2026 debut. It has now cratered -42% from its peak, to near its record low. Meanwhile, put options tied to CoreWeave, $CRWV , surged to record levels in October. Notably, some of the most popular contracts expire in 2028 and pay out if the stock falls to $35, compared with a share price of ~$55 currently. At the same time, the cost of protecting against debt defaults at Amazon, Alphabet, $GOOGL, Microsoft, Meta and Oracle has risen to its highest level since 2021. Oracle has seen an especially sharp repricing, with its credit-default spreads widening by more than +1 percentage point. The growing demand for downside exposure reflects concerns about debt-financed data-center projects and purchases of AI chips, as well as the possibility of slowing AI demand and falling computing prices. Nevertheless, the broader AI trade still remains crowded, even as more participants position for a potential collapse in the neocloud business model. The AI Trade is cracking from all directions.

US Treasury borrowing has reached UNPRECEDENTED levels: US officials sold a record $839 billion in Treasury bills, notes, and bonds last week, with weekly auctions now regularly exceeding half a trillion Dollars. This figure was the sum of the 11 auction sizes, and the majority of it went to repay holders of maturing bills. Meanwhile, with annual federal deficits running at a massive ~$2 trillion, investors are watching for a major shift in the Treasury's borrowing strategy, potentially involving fewer long-term bonds and even more short-term debt. For instance, Citigroup expects cuts to 20-year and 30-year bond sales starting this month. The shift toward short-term borrowing is already evident, with Treasury bills accounting for ~22% of outstanding US debt in September, way above the 15-16% seen before 2020. This is also above the 20% average recommended by the Treasury's advisory committee. However, greater reliance on short-term bills means more frequent refinancing, leaving the Treasury increasingly exposed to changes in investor demand and interest rates. With 30-year Treasury yields still above 5.25%, investors are now bracing for Wednesday's November 4th quarterly refunding announcement, which could reveal whether the Treasury plans to reduce long-term bond sales and shift even more borrowing toward short-term debt. The US public debt crisis is back in investors' focus.

Hedge funds are pulling back from AI at the fastest pace on record: Hedge funds have moved underweight the broader AI trade for the first time since early 2023, according to Morgan Stanley data. This comes as hedge funds have reduced their combined long and short exposure to global equities by -8% since June, marking the largest sustained period of position reduction on record. Hedge funds cut exposure most heavily to Hyperscalers, Energy, Materials and Real Estate, with ~35%-40% of long/short hedge funds now delivering flat or negative returns year-to-date. Meanwhile, 6-month correlations between S&P 500 stocks have fallen below 10%, marking a record low, and showing how independently individual stocks within the index move. The market's growing disconnect was evident on Thursday, when the S&P 500 finished lower despite more than 80% of its constituents finishing higher, the first such session in nearly 40 years of data. Hedge funds have cut exposure at a record pace, but more selling could still lie ahead.

The Bank of Japan is accelerating the unwinding of its massive ETF holdings: Starting in January, the Bank of Japan will nearly triple its annual ETF sales, from ¥330 billion to ¥860 billion in book value. However, it will still take ~43 years to fully unwind the portfolio, down from 112 years. Nevertheless, the market impact is expected to remain limited, with planned annual sales of roughly ¥2.4 trillion at market value compared with average daily TOPIX trading turnover of approximately ¥9 trillion. Japanese equities initially came under pressure following the announcement, but investors showed confidence that the market could absorb the additional supply, with the Nikkei 225 still up +25% year-to-date and the Topix up +16%. Meanwhile, faster ETF disposals could generate approximately +¥800 billion in additional annual revenue for the BoJ, boosting its surplus payments to the government. This could provide additional funding for Prime Minister Sanae Takaichi's spending agenda, including economic security initiatives, growth investments and higher defense outlays. Even with accelerated sales, the BoJ's enormous ETF portfolio will take decades to unwind.

The hidden AI financial obligations are SKYROCKETING: Disclosed off-balance-sheet commitments across Alphabet, $GOOGL , Amazon, $AMZN , Meta, $META, Microsoft, $MSFT, Nvidia, $NVDA , Broadcom, $AVGO, Oracle, $ORCL, and SpaceX surged to a record $4.1 trillion in October. This is up from $3.1 trillion in August and $1.8 trillion in June. Off-balance-sheet commitments are now more than 4 TIMES the $1.0 trillion in on-balance-sheet debt and leases. The increase is largely driven by massive future purchase obligations, which climbed to $2.25 trillion from $1.73 trillion, while leases yet to commence rose to $1.39 trillion from $1.12 trillion. Meanwhile, guarantees and financial backstops jumped to $273 billion from $158 billion, adding another layer of future financial obligations. Among companies reporting Q3 figures, Meta, $META, added +$195 billion in commitments, Alphabet, $GOOGL, +$164 billion, Amazon, $AMZN, +$131 billion, Microsoft, $MSFT, +$35 billion, and SpaceX +$51 billion. Notably, Nvidia, Broadcom and Oracle account for another $381 billion of the increase in the updated estimate, although their figures still rely on summer filings rather than Q3 reports. The $4.1 trillion is just the beginning, with further increases coming as more companies disclose their latest commitments.

Meta's AI spending is increasingly becoming a CREDIT risk: Meta's, $META, 5-year credit default swap (CDS) spread, which measures the cost of insuring against default, has surged to 127.9 basis points, up from just 49.9 bps a year ago and approaching its October 23rd high of 130.5 bps. Meanwhile, S&P Global Ratings lowered its outlook on the company from stable to negative, while affirming its AA- credit rating, citing rising leverage and growing pressure from AI-related spending. S&P expects Meta's CapEx to reach $140 billion in 2026 and accelerate to more than $225 billion in 2027, while leverage could exceed 1.0x next year, up from approximately 0.1x in 2025. The firm has also disclosed more than $800 billion in future spending commitments, with nearly 50% tied to leases that have not yet begun, largely for data centers and energy infrastructure. Crucially, S&P considers Meta's ability to monetize its AI investments more limited than that of its peers, warning that it remains unclear when AI spending will generate enough revenue to offset rising costs. Credit risk is surging among Big Tech amid record debt issuance and AI spending.

Big Tech share offerings are already leaving investors underwater: Shares of Alphabet, $GOOGL, Meta, $META, and Intel, $INTC, have fallen below their recent offering prices, with Alphabet Class C down -32.5%, Alphabet Class A -21.5%, Intel -21.1%, and Meta -2.4%, based on their October 30th intraday lows. This comes after Alphabet announced its equity sale plan in June, later increasing its size to as much as $85 billion. Intel raised $23 billion in August, while Meta launched a $25 billion share sale last week. The selloff followed disappointing earnings, with Alphabet missing Search revenue estimates and Intel reporting supply-chain problems affecting data center components, intensifying concerns over the sustainability of AI spending. Furthermore, investors are also concerned that Meta's AI spending could outpace monetization, putting further pressure on cash flow and margins, while its planned sale of up to $60 billion in additional shares creates another overhang for the stock. The selloff could make it increasingly difficult for Big Tech companies to raise the additional equity capital needed to finance their infrastructure expansion, particularly as cash flows have turned negative and AI monetization remains uncertain. Share dilution is becoming another cost of the AI frenzy.

The AI trade is struggling more than EVER: The Broad US AI Basket dropped -13% in October, it largest monthly DROP EVER. At the same time, the S&P 500 excluding AI stocks surged +8%, its best monthly performance since 2022. The S&P 500 ex-AI is now up +14% year-to-date and has risen to an all-time high. Meanwhile, Magnificent 7 stocks fell -6% in October, while the S&P 500 excluding the Mag 7 rose +1%. Lastly, the Nasdaq 100 dropped -3.5% on Friday, posting its biggest monthly underperformance against the S&P 500 Equal-Weight Index since 2001, when the dot-com bubble burst. Investors are losing faith in the AI theme.