Michael Burry Shorts AI

Good Afternoon. US equities slipped this week amid AI bubble fears and soft labor data. CEOs of Goldman Sachs and Morgan Stanley warned of a potential 10–20% market correction, which further fueled negative sentiment. Adding to uncertainty, the Supreme Court is reviewing the legality of Trump-era tariffs. Tech-heavy Nasdaq dropped over 3% for the week.

Below are the key things to note this week:

Dip Buying: U.S. equity funds recorded strong inflows in the week ending November 5 as investors increased exposure during the market correction, driven by optimism around AI-related corporate deals. Net inflows totaled $12.6 billion, the highest since October 1. Large-cap funds gained $11.9 billion, small-caps $114 million, while mid-caps saw $1.17 billion in outflows. Technology attracted $2.38 billion, its biggest in five weeks, but financials saw $1.27 billion in withdrawals.

Strong Q3 Earnings: So far, 91% of S&P 500 companies have reported Q3 2025 results. Of these, 82% beat EPS estimates—above the 5-year average (78%) and 10-year average (75%)—matching the highest since Q3 2021. On aggregate, earnings are 7% above estimates, in line with the 10-year average but slightly below the 5-year norm of 8.4%. So there is nothing wrong, as such, with the economy to warrant an excessive sell-off. Markets can’t go up all the time, and some consolidation is expected after a long rally since April. The Fed is expected to cut in December, which should suit markets.

It will be key to monitor bank reserves closely, ON RRP and SRF usage to gauge potential stress. Adding those details below from this week.
 

For the week:

• The S&P 500 is down 1.63%, the Nasdaq is down 3.04%, and the Dow 30 is down 1.21%.

  

  Barchart

CNN's Fear & Greed Index now stands at 21 (Extreme Fear) out of 100, down 14 points from last week. Details here

The top five trending stocks on Reddit are SPY, Nvidia, Meta, Tesla, and Robinhood. Read More

Liquidity:

• Banking Reserves + ON RRP: Banking reserves are falling faster than expected. As of Nov 6th, they stand at ~$2.8 trillion. The Overnight Reverse Repo balance is also negligible, which shows banks have no excess cash to park. As per my analysis, reserves falling to ~$2.5 trillion will be concerning, so we still have some room, but I was not expecting such a quick drop in the last few weeks from $3.2 trillion in September. Something to watch closely to see if this recovers back to ~$3 trillion.

• Standing Repo Facility (SRF): SRF usage is almost 0 now, which is at least a good sign and suggests that banks are not in urgent need of cash.

Here is a summary of this week’s key economic releases:

Target Rate Probabilities for December 10th FOMC Meeting:

CME FedWatch

OpenAI- Amazon Deal: OpenAI signed a $38B deal with AWS, gaining immediate access to Nvidia GPUs. The move marks a major shift from its earlier Microsoft exclusivity, giving OpenAI greater flexibility to scale its infrastructure through 2026 and beyond. Read

Musk Secures $1 Trillion Package: Tesla shareholders approved Elon Musk’s record pay package at the annual meeting in Austin, with 75% of voting shares in favor. The plan was first introduced in September. Read

Big Short: Burry’s Scion Asset Management disclosed $187M in Nvidia put options for Q3, signaling a bearish stance. It also reported a larger $912M position in Palantir, with both positions accounting for 80% of its portfolio. Read

Stablecoins’ Impact on Rates: Fed Governor Stephen Miran said rising demand for dollar-backed stablecoins could help lower U.S. interest rates. Speaking in New York, the Trump appointee noted that the influx of dollar-pegged tokens may reduce the “r-star” — the neutral rate that neither stimulates nor restrains growth. Read

Palantir Beat: Palantir reported adjusted earnings of $0.21 per share on revenue of $1.18B, up 63% year-over-year and above expectations. U.S. revenue surged 77% to $883M, with commercial revenue up 121% and government revenue up 52%. The firm closed 204 deals over $1M, totaling $2.76B in contract value, up 151%, including $1.31B in U.S. commercial contracts. Customer count rose 45% year-over-year.

AMD Beat: AMD reported adjusted earnings of $1.20 per share on revenue of $9.25B, up 36% year-over-year. Data Center revenue rose 22% to $4.34B, driven by strong demand for MI300 AI accelerators and EPYC processors, surpassing estimates. Client revenue jumped 46% to $2.75B, and gaming surged 181% to $1.3B on Radeon GPU strength, while Embedded sales declined 8% to $857M.

Amgen Beat: Q3 Non-GAAP EPS was $5.64, exceeding estimates by $0.63. Revenue rose 12% YoY to $9.6B, surpassing expectations by $630M. Product sales grew 12%, driven by a 14% increase in volume, partially offset by a 4% decline in net selling prices. Sixteen products posted double-digit sales growth in the quarter.

Arista Network Beat: The company reported adjusted EPS of $0.75, above the $0.71 consensus, and GAAP EPS of $0.67 versus $0.66 expected. Revenue reached $2.31 billion, exceeding the $2.27 billion estimate. Adjusted gross margin was 65.2%, one point higher than forecast.

Uber Beat: Uber posted another strong quarter with double-digit growth in rides and gross bookings, reporting GAAP earnings of $1.20 per share on record revenue of $13.5B. However, its Q4 outlook disappointed, with projected adjusted EBITDA of $2.41B–$2.51B, a midpoint of $2.46B below the $2.49B estimate.

McDonald’s Miss: Q3 non-GAAP EPS was $3.22, missing estimates by $0.11, while revenue rose 3.1% year-over-year to $7.08B, slightly below expectations. Global comparable sales grew 3.6%, driven by gains of 2.4% in the U.S., 4.3% in International Operated Markets, and 4.7% in International Developmental Licensed Markets.

Applovin Beat: The company reported Q3 GAAP EPS of $2.45, exceeding estimates of $2.39. Revenue reached $1.41B versus $1.34B expected, while net income rose to $835.5M against $826.5M forecast. For Q4, it guides revenue between $1.57B and $1.6B, above the $1.55B estimate, with an adjusted EBITDA margin of 82–83%.

Robinhood Beat: Q2 GAAP EPS rose to $0.61, above the $0.54 estimate and up from $0.42 in Q1 and $0.17 a year ago. Net revenue climbed to $1.27B, exceeding the $1.22B consensus and improving from $989M last quarter and $637M last year.

Shopify Beat: Q3 net income was $264M on revenue of $2.84B, up 31.5% year over year and $80M above estimates. For Q4 2025, the company expects revenue growth in the mid-to-high twenties, gross profit growth in the low-to-mid twenties, and operating expenses at 30–31% of revenue.

Qualcomm Beat: For the quarter ended Sept. 28, the company reported adjusted earnings of $3 per share on $11.27B in revenue, up 10% year over year. It recorded a $5.7B non-cash charge tied to the One Big Beautiful Bill Act, reducing GAAP earnings by $5.29 per share. The firm expects to be subject to the U.S. corporate alternative minimum tax starting in fiscal 2026.