Nvidia's $250 billion problem 📉

Welcome back to the Day Trading newsletter 📈

A report that Nvidia may backstop $250 billion of OpenAI's data-center bills sent chip stocks sliding from Wall Street to Seoul, all while the Fed sits down for its most unpredictable meeting in years.

Let’s get into it 👇️ 

🛢️ Oil just posted its biggest one-day drop since April: Brent crude fell 8.7% Monday to $88.36 as the U.S. and Iran paused attacks to make "space" for diplomacy. WTI slid 7.5% to $82.61. After 13 straight nights of strikes, both sides are talking again. $100 oil is suddenly in the rearview.

📉 ASML shares slid 8% in midday trading Monday after China began mass production of domestically made deep ultraviolet chipmaking tools. The Dutch company's lithography machines have long been a chokepoint China couldn't engineer around: a homegrown alternative, even a less advanced one, chips away at that moat and adds a second front to this week's semiconductor selloff.

🍹 Jack Daniel's maker Brown-Forman rejected a renewed $15 billion takeover bid from rival spirits giant Sazerac, calling the offer "not actionable." Sazerac went directly to shareholders asking them to reconsider its all-cash $32-a-share offer (a 23% premium) but the Brown family, which controls a majority of the voting Class A shares, isn't selling.

🚀 SpaceX stock has now fallen 20% below its $135 IPO price, erasing roughly $1.2 trillion in market value from its June peak. Shares of the Elon Musk rocket company traded near $109 Monday, down more than 50% from their post-IPO high of $225.64. It’s one of the largest market-cap wipeouts in history, just six weeks after the debut.

🎤 The Fed kicks off its two-day meeting today, and Monday's oil crash just took some pressure off the hawks. Traders now put the odds of a quarter-point hike Wednesday at roughly 36%, with a hold at 3.5%–3.75% still the base case. The decision lands Wednesday at 2pm ET, with Chair Kevin Warsh's press conference at 2:30.

🔽 Bitcoin slid below $64,000 ahead of the Fed decision, opening Tuesday around $63,700 (down 2.5% from Monday). Ethereum fell harder, opening near $1,891, off 3.2%. Crypto traded lower alongside Asia's chip rout — a reminder that when rate uncertainty and risk-off collide, bitcoin still trades like a tech stock.

💵 Big Tech's earnings gauntlet starts tomorrow: Microsoft and Meta report Wednesday after the close, with Apple and Amazon on Thursday. After Alphabet's free-cash-flow shock and Nvidia's $250 billion backstop report, AI capital spending is the number everyone will be watching. Restraint could calm the chip rout, or confirm the boom is cooling.

📊 The 10-year Treasury yield eased to 4.64% Monday, backing off last week's 18-month high of 4.70% as oil prices tumbled. Falling crude cools inflation expectations, which cools bond yields, and that's a little relief for mortgage rates and corporate borrowing costs heading into Wednesday's Fed decision.

The Wall Street Journal reported over the weekend that Nvidia is in talks to guarantee roughly $250 billion in financing for a 10-gigawatt data-center campus in southern Ohio that OpenAI plans to lease.

Nvidia would backstop the project's lease and construction debt, and is separately exploring a structure to help finance OpenAI's purchases of its chips.

Wall Street's read: another strike against the AI trade.

Nvidia fell 5% Monday to $196.51 and handed the world's-most-valuable-company crown back to Apple (about $4.94 trillion vs. $4.83 trillion) for the first time in 15 months.

Overnight, the selloff went global: 

• South Korea's Kospi cratered 10.8%, triggering a marketwide circuit breaker in Seoul

  • Samsung fell 13.4%, its worst day in almost two decades

  • SK Hynix dropped 14.7%

• Japan's Nikkei lost more than 4% and memory-chip maker Kioxia slumped 18%.

This is the "circular financing" problem in plain sight. Nvidia's blockbuster revenue comes from customers like OpenAI buying its chips. Now, Nvidia may be putting its own balance sheet on the line so those customers can keep buying.

If AI demand is partly propped up by the seller financing the buyer, investors have to ask how much of the boom is real end-demand and how much is money moving in a circle.

That question just wiped out hundreds of billions in chip market value in two trading sessions.

What to watch:

• Microsoft and Meta (two of the biggest AI spenders) report earnings Wednesday after the close, and any hint of capex restraint would pour fuel on this fire.

• Whether Nvidia formally confirms or walks back the deal, and whether Asia's rout spills back into U.S. megacaps when Wall Street opens.

 RATE TODAY’S EDITION

⚠️ Disclaimer: Not financial advice. Do your research before making any trades.