Fears of an AI bubble are hammering stocks for the 4th straight day https://t.co/oupdzkjjhv ...

Group 1 - Anthropic plans to invest $30 billion in compute to scale its Claude AI model on Microsoft's Azure cloud platform, with Nvidia powering the infrastructure [1] - Nvidia will invest up to $10 billion in Anthropic, while Microsoft will contribute up to $5 billion as part of the deal [1] - Anthropic will be the first AI model available on all three major cloud platforms, according to its CEO Dario Amodei [2] Group 2 - Anthropic is committed to contracting additional compute capacity of up to one gigawatt, utilizing Nvidia's Grace Blackwell and Vera Rubin systems [3] - Concerns about an AI bubble are rising on Wall Street due to increasing valuations and spending commitments [4] - Nvidia's upcoming earnings report is anticipated to serve as a market barometer for AI outlook, with its shares having declined approximately 7% in the last five days [4]

Hello and welcome to Morning Brief Market Sunrise. I'm Raman Carmali live from Yahoo Finance Studios in London. It's Tuesday 18th November.Coming up on the show, Bitcoin falls below $90,000. I've been talking to a top executive at one of the world's largest chip companies and some signs of consumer weakness after Home Depot results disappoint. So, grab your coffee and let's own the morning.Okay, we're going to focus on markets. Let's start with crypto. Bitcoin fell below $90,000 in Asia trading earlier.Howe ...

Group 1 - Investors' cash positions have dropped below a critical threshold, with average cash held by global fund managers falling to 3.7%, a level that has only occurred 20 times since 2002, triggering a sell signal for equities [1] - The S&P 500 is currently about 3% below its October peak, indicating signs of strain in stock markets amid concerns of a potential bubble in artificial intelligence stocks [2] - Investor exposure to stocks is at its highest since February, with expectations that the market will "correct further" without an interest rate reduction next month, positioning now acting as a headwind for risk assets [3] Group 2 - Financial markets are under pressure as investors reassess economic growth outlooks, with warnings from JPMorgan Chase's Vice Chairman about the need for reassessment of AI valuations, which could impact the stock market [4] - The Bank of America survey indicates that a potential AI bubble is viewed as the biggest tail risk, with 42% of respondents expecting international equities to outperform US stocks next year, reflecting a broader sentiment that US stocks may lag behind [5] - UK stocks have seen the largest three-month drop in allocations since October 2022, driven by concerns over the economic outlook and potential tax hikes and austerity measures from the Labour government [6]

Core Insights - Klarna's recent performance highlights significant growth in the U.S. market, with gross merchandise volume increasing by 43% year-over-year, reaching $32.7 billion, up from $26.2 billion [3] - The company reported a revenue growth of 26%, totaling $706 million compared to the previous year, although it faced a net loss of $95 million, a decline from a net income of $12 million a year ago [3] Group 1: Product Adoption and Market Growth - The Klarna Card has gained traction, reaching over four million customers and accounting for 15% of transactions by October [1] - Features like fair financing, which offers longer installment options, have contributed to U.S. gains, with gross merchandise volume more than tripling from a year ago [2] - The number of merchants using Klarna has grown by 38%, increasing from 616,000 to 850,000 year-over-year [5] Group 2: Future Projections and Financial Outlook - For the fourth quarter, Klarna anticipates gross merchandise volume between $37.5 billion and $38.5 billion, with revenues projected between $1.065 billion and $1.08 billion [5] - Transaction margin dollars are expected to range between $390 million and $400 million, indicating a focus on profitability [5] Group 3: Strategic Initiatives and AI Integration - CEO Sebastian Siemiatkowski noted that fair financing has doubled the user base but only penetrated about 20% of merchants, presenting significant growth opportunities [4] - The company has heavily invested in artificial intelligence, which has contributed to a 40% reduction in workforce, while maintaining a focus on customer service efficiency [7][8] - Siemiatkowski emphasized the importance of human connection in customer service, cautioning against companies relying solely on AI [8] Group 4: Market Challenges and Stock Performance - Klarna's stock has seen a decline of over one-third from its highs, amid broader market concerns regarding a potential AI bubble and slowing consumer spending [6] - The company is monitoring changes in payback and spending habits due to the current economic environment but has not yet observed significant impacts [7]

Market Overview - The U.K. stock market's benchmark FTSE 100 is experiencing a significant decline, down 120.72 points or 1.25% at 9,554.71, marking the fourth consecutive session of losses [2] - Concerns regarding the global economic outlook, particularly related to the AI bubble, U.S. tariffs, and the Federal Reserve's policy decisions, are negatively impacting investor sentiment [1] Sector Performance - Major bank stocks such as Standard Chartered, HSBC Holdings, and Barclays have seen declines ranging from 3.2% to 3.5% [2] - Other notable declines include Anglo American Plc down 3.7%, Convatec down 3.6%, and IAG down 3.1%, with Fresnillo and Antofagasta also down nearly 3% [2] Company-Specific Movements - Companies like Schroders, WPP, Prudential, Rio Tinto, Diageo, 3i Group, Mondi, Airtel Africa, Glencore, and Rolls-Royce Holdings are also experiencing sharp declines [3] - In contrast, ICG is gaining nearly 6% due to stronger than expected earnings, while Imperial Brands is up 2.7% following a nearly 5% increase in annual adjusted operating profit [3] - Other companies such as Rightmove, BAE Systems, Sainsbury (J), AstraZeneca, British American Tobacco, and Centrica are showing modest gains [3]

Core Insights - Nvidia shares have increased nearly 40% in value in 2025 so far, making it a focal point for traders as it prepares to report quarterly results [1][8] - Options pricing indicates that traders expect Nvidia's stock could move nearly 7% in either direction following the earnings report, with potential recovery to around $199 or a drop to about $174 [2][7] - Nvidia's earnings have historically led to sell-offs post-announcement, with the stock often closing lower than pre-earnings levels in recent quarters [3] Financial Expectations - Analysts anticipate Nvidia will report adjusted third-quarter earnings per share of $1.26, with revenue expected to jump nearly 60% year-over-year to a record $55.4 billion [5][7] - Whisper numbers suggest that Nvidia may exceed analysts' projections and raise its full-year outlook, indicating strong market confidence [5] Market Impact - Nvidia's earnings release is highly anticipated and is expected to significantly influence the broader stock market, especially amid concerns of an AI bubble [4] - The stock remains a favorite among analysts, with a majority rating it as a "buy" and a mean target price suggesting approximately 17% upside from recent closing levels [8]

Investment Rating - The report indicates a bullish sentiment among investors, with a net 34% overweight in global stocks, the highest since February 2025 [3][132]. Core Insights - Investors are optimistic about a soft landing for the economy, with 53% expecting this outcome, while global growth expectations have turned positive for the first time since December 2024 [2][19][23]. - The most crowded trade is "long Magnificent 7," with 54% of investors participating, while the AI bubble is seen as the biggest tail risk by 45% of respondents [3][28][31]. - The report highlights a significant shift in asset allocation, with increased exposure to emerging markets, healthcare, and commodities, while UK stocks and consumer discretionary sectors saw the largest declines in allocation [4][51][56]. Summary by Sections Macro Insights - 53% of investors expect a soft landing, 37% foresee no landing, and only 6% predict a hard landing [17][19]. - Global growth expectations have turned positive, with a net 3% of investors anticipating stronger economic conditions [23][105]. Asset Allocation - The report shows a net 17% overweight in commodities, the highest allocation since September 2022 [51][143]. - There has been a record decline in allocation to consumer discretionary stocks, now at a net 23% underweight [56]. Investor Sentiment - The average cash level among investors dropped to 3.7%, indicating a "sell signal" as historically low cash levels have preceded declines in stock prices [14][16]. - The Bull & Bear Indicator remains neutral at 6.3, suggesting a cautious approach among investors [99]. Future Expectations - 37% of investors expect MSCI Emerging Markets to outperform in 2026, while 30% anticipate the Japanese yen to be the best-performing currency [68][71]. - The most bullish catalyst for 2026 is widespread AI productivity gains, as indicated by 43% of respondents [72][75].

Market Overview - Global equities experienced a significant decline due to concerns over inflated valuations and an uncertain macro environment, particularly ahead of Nvidia's earnings report [1][2] - The pan-European Stoxx 600 index opened lower, with mining and banking sectors leading the losses, while the Stoxx Europe 600 Technology Index fell by 1.4% [1][2] U.S. Market Performance - The three major U.S. indexes, including the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, closed in the red, reflecting a broader market downturn [2] - Asia-Pacific markets also saw declines, particularly in Japan and South Korea [2] Investor Sentiment - Market analysts suggest that the recent sell-off is a natural profit-taking phase following a strong market performance since April, with potential declines of about 5% from recent highs [2][4] - There is a prevailing skepticism in the market regarding the funding of mega-deals announced over the summer, indicating a shift in investor sentiment [5] Earnings and AI Sector - Nvidia's upcoming third-quarter earnings are highly anticipated, as the company is viewed as a key indicator for the AI industry, with many major players relying on its GPUs [3] - The earnings season has shown that major hyperscalers are still generating substantial revenue, with investors closely monitoring Meta as a barometer for future AI applications [4] Macro Environment and Risks - There is a noted element of de-risking among investors due to uncertainties surrounding a previously expected Federal Reserve rate cut, which may now be postponed [6] - Upcoming decisions from the U.S. Supreme Court regarding tariffs could further complicate the macroeconomic landscape [7][8] Cryptocurrency Market - The cryptocurrency sector is facing pressures from macro-driven sell-offs and forced liquidations, with Bitcoin and Ether experiencing significant declines of approximately 25% and 35% from their recent highs, respectively [9][10] Infrastructure Challenges - A critical issue facing the AI revolution and other sectors is access to electricity, which is essential for powering data centers, potentially slowing down growth in these areas [10][11]

Market Overview - European stocks are sharply lower amid a global sell-off, with investors anticipating economic data from the U.S. following the end of the government shutdown [1] - Major tech companies are facing renewed selling pressure due to concerns over inflated AI valuations, while Bitcoin has lost all its gains for the year, indicating a potential deeper downturn [1][2] - The European Commission has upgraded its growth forecast for 2025 but cautions that government deficits are expected to rise, potentially impacting investor confidence, particularly in the tech sector [1] Technology Sector - The market is experiencing a significant shift from aggressive buying to intense selling, particularly in tech stocks, with Nvidia's upcoming earnings report being closely watched [1] - Advanced Micro Devices (AMD) has seen a decline of approximately 2.5%, while Nvidia remains up a couple of percent over the past month, indicating a mixed sentiment in the tech sector [1] - Concerns about overvaluation in the AI sector are prevalent, with references to the dotcom boom highlighting potential irrationality in current market behavior [2] Cryptocurrency Market - Bitcoin has entered a deep bear market, down nearly 30%, with significant leverage issues exacerbating the situation [1][2] - The cryptocurrency market is characterized by a high number of cryptocurrencies, exceeding 18,000, which adds complexity to market dynamics [2] - Institutional support and regulatory backing have not shielded Bitcoin from market volatility, raising questions about its role as a diversifier from fiat currencies [1][2] Federal Reserve and Economic Policy - The Federal Reserve is experiencing conflicting views among officials regarding potential rate cuts, with some advocating for immediate cuts while others suggest a more cautious approach [2] - Market participants are closely monitoring economic indicators to gauge the likelihood of future rate cuts, with expectations that the Fed may pause in the first half of the next year [2][3] - The Supreme Court's upcoming decisions on tariffs could introduce additional volatility in the markets, particularly affecting risk assets [3][4] Investment Outlook - Analysts suggest that the current market correction may be a natural profit-taking phase rather than a major catalyst for a downturn [2] - Predictions indicate that U.S. equities are overvalued, with expectations of another correction next year, while emerging markets like India and Brazil may present better investment opportunities [3] - The corporate bond market is adjusting to increased supply, with spreads needing to widen slightly to attract institutional investment [3]