The Morning Brief
Traders walk into Wednesday with AI capex euphoria colliding against hot U.K. inflation, soft Japanese trade data, and an earnings tape that swung wildly between blowout guidance and guidance disasters.
Overseas data complicates the rate picture.
U.K. CPI ran hotter than expected, up 3.5% year over year versus 3.4% forecast and accelerating from 3.1% prior, with producer input prices also running above consensus. That pressures the Bank of England's easing path and lifted the U.K. ETF (EWU), up 0.9%. Japan's trade figures went the other way: exports grew just 16.7% year over year versus 20.1% expected, and the trade balance missed badly, a sign external demand is cooling even as Tokyo keeps policy accommodative. In Asia's chip complex, Samsung and SK Hynix are upgrading China plants to produce more advanced memory for AI demand despite ongoing U.S. export curbs, a story that cuts against the decoupling narrative. Nvidia (NVDA) used its GTC Berlin stage to unveil the DSX Pod factory-built Vera Rubin reference design and said it has put nearly 10 billion euros into Europe over the past year, reinforcing that the AI infrastructure buildout is now a geopolitical as much as a technology story.
The SpaceX-Tesla merger tease is the story nobody saw coming.
Elon Musk confirmed overnight that SpaceX (SPCX) and Tesla (TSLA) have formed special committees to discuss a potential merger, calling it "a good idea." That landed alongside a genuine blowout SpaceX quarter: a $63 billion backlog, 13.6 million Starlink subscribers, and Musk talking up $500 billion to $1 trillion in annual recurring revenue by the end of 2027. Super Micro Computer (SMCI) piled onto the AI-capex enthusiasm, raising its fiscal Q1 revenue guidance from a $14.5-15.5 billion range to $18.5-19.5 billion, sending shares up double digits premarket and pulling Dell and HPE higher in sympathy. Skeptics are still pushing back, with Wall Street split on CoreWeave's valuation amid AI debt concerns.
Earnings reaction was a mixed bag.
Netflix (NFLX) slid after Q3 sales missed and the company guided Q4 and narrowed full-year guidance below estimates, even as the CFO talked up double-digit revenue growth into 2027. Intuitive Surgical (ISRG) beat estimates but shares fell on a GAAP EPS decline tied to a $450 million settlement charge still awaiting court approval. Capital One (COF) climbed on a clean beat, while Alaska Air and United Airlines both guided Q4 profitability well below Street expectations on fuel cost pressure.
On the radar today:
a packed earnings slate including Tesla, Meta, IBM, Texas Instruments and Lam Research after the close, plus CSX, Danaher, NextEra, Philip Morris and CME Group before the bell. Futures and the broader tape (SPY, QQQ) sit little changed after yesterday's rally cooled, with the Russell (IWM) outperforming and Treasuries (TLT) firmer.
Bottom line: the AI trade is still driving the tape, but hot U.K. inflation, soft Japan exports and a widening split between earnings winners and losers mean today's open will test whether conviction or caution wins out.