Earnings carnage

$500 billion wiped from Alphabet's market cap, its biggest one-day drop ever as Google's parent company slid over 13% on renewed concerns around AI investment and its effect on online advertising revenue. Amazon hit hard in the same session, dropping around 7% on weaker online business. Intel shares plummeting in the after-market after missing estimates by a wide margin, down close to 25%. Sectors outside tech largely resilient though throughout the week, limiting wider damage. Traditional safe havens nonetheless seeing inflows; CHF and bond markets benefitting as a result. Metals sharply lower, gold back on the wrong side of $4,000, its lowest levels since July. A surprise hold from the RBNZ sees the Kiwi slide to 13-year lows. BoJ likewise keeping rates steady this month, happy that inflation is now within its targeted range. ECB holding too, the only surprise there that President Lagarde is stepping down ahead of schedule. Oil pushing higher once more as shipping is disrupted through the Strait. Cryptos on the slide after Binance hit by a North Korean group in the biggest crypto theft ever, with $6.3 billion of virtual currency impacted.

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Biggest crypto theft ever

Mt Gox, FTX, now Binance. A software engineer's laptop is thought to have been the route in for TraderTraitor, North Korea's hacking unit, as it carried out its heist on a crypto giant. Binance has frozen around $3 billion of assets on-chain and suspended all withdrawals while it investigates a serious blow for the crypto industry. Co-founder Yi He has told its customers that all losses will be covered by his company. These reassurances appear to be providing support to prices, bitcoin recovering some of its earlier losses as I write. The $6.3 billion worth of coins affected represents approximately 4% of the total amount held in custody by Binance. Investigators are now following funds across the blockchain in their attempts to redirect and recoup the stolen assets. Crypto markets were already fragile this week, feeling some of the effects of the tech selloff. The US midterms are also key, with Democrats less supportive of the looser regulation that Trump has championed this term. All in all it feels like another good reminder of the benefits of trading crypto prices without owning them, e.g. through CFDs!

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Is Google eating itself?

Google's core business has been hit by its own innovations. The fast-increasing popularity of AI Mode on the search engine saw sales of advertising from what we would now call traditional search miss estimates. These sales, around half of Alphabet's overall revenue, are essential in funding the staggering $1 trillion currently committed to AI investment. So the success of its new AI feature is hurting its own sales, which are needed to fund further AI features, which would then hurt its sales further...? and round and down we go...? The obvious conclusion is that Google needs to work out how to better monetise AI search, as capital expenditures already at record levels continue to soar. YouTube revenues also missed estimates, and Alphabet's investment in SpaceX ran up a $9 billion loss. Shortly before releasing the disappointing earnings report, Google announced Carbon, its latest AI model. Another significant move in its extraordinarily expensive attempts to keep pace with Anthropic and OpenAI.

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Next week

The RBA will hand down its rate decision on Melbourne Cup Day, Tuesday. The market is currently pricing in the chances of another hike at about 80%, and the big four banks are all calling for an increase with inflation persistently high in Australia. It is not a fait accompli though, so keep an eye on it as you finalise your exotics and sweepstakes on the race that stops a nation. Otherwise Eurozone CPI will be in focus on Wednesday, along with employment data from the US on Thursday and Friday. Also on Thursday, Governor Bailey will hand down the Bank of England's call on rates. A hike to 4.0% is widely expected there.

The US Q3 earnings season releases keep coming in thick and fast. Highlights include Apple and Palantir in the after-market session on Monday, Uber and Snap in the after-market on Wednesday, Airbnb on Thursday and Moderna in the pre-market session on Friday. Be aware too that US daylight saving time ends this weekend (despite DJT's push to put an end to clock changes), with market hours adjusting accordingly. Go well out there.