DHUnplugged #812: Rollercoaster Ride

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DO WE TALK ABOUT MORE AI HACKING
- Latest stories of even more AI breach of containment
- Is this really just a plan to gain regulation (to limit competition?)

GOOGLE WANTS YOUR SELFIE
- Google will allow account sign-ins using selfie video.
- The feature adds another way to verify identity.
- It could reduce dependence on passwords and recovery codes.
- The tradeoff is greater use of facial data.
- Privacy, storage and security questions will follow.

SPACEX SHORT SELLERS CASH IN
- Short sellers reportedly earned $15.5 billion as SpaceX shares fell.
- The move rewarded investors betting against the company's valuation.
- It shows how quickly enthusiasm can reverse at extreme prices.
- SpaceX still has strong growth stories in launches and satellites.
- The debate is whether too much future success was already priced in.
--- Price hit $108 today before bouncing - major rug pull

CATHIE WOOD DOUBLES DOWN ON SPACEX
- Cathie Wood called SpaceX potentially the most important company in history.
-  Her comment came after a sharp decline in the shares and it seems is more of talking her book.
- Her case rests on launch, satellite and communications growth.
- The problem is that losses are expected for the foreseeable future.

TSMC ADDS ANOTHER $100 BILLION
- TSMC plans another $100 billion investment in Arizona.
- Second-quarter profit surged 77%.
- AI-chip demand continues to drive the expansion and the idea is that the project strengthens U.S. semiconductor production.
- It also adds labor, construction and execution risk.
- The spending shows the scale of the AI infrastructure race.
--- So far many of these promises have been a bit hallow

BOND YIELDS FEEL THE OIL SHOCK
- The 10-year Treasury yield reached its highest level since January 2025. (4.7%)
- Surging oil prices brought inflation fears back into the market.
- Higher energy costs could delay Federal Reserve rate cuts.
- Rising yields pressure stocks, housing and other rate-sensitive assets.
- Oil is again influencing the entire interest-rate outlook.
- 30-year is zooming higher and higher

CANADA GETS A 50% TARIFF
- Trump imposed 50% tariffs on some Canadian goods.
- The administration cited discrimination against U.S. companies.
- The move could raise costs for manufacturers using Canadian inputs.
- Canada could respond with tariffs of its own.
- The fight adds more uncertainty to North American trade.

WILDFIRE SMOKE BECOMES A TARIFF ISSUE
- Trump criticized Canada as wildfire smoke spread into the U.S.
- He said pollution costs could be added to tariffs.
- The idea links environmental damage directly to trade policy.
- Canadian goods could face another unpredictable cost.
- Companies may struggle to price a pollution-based tariff.

MIAMI TURNS INTO A BUYER'S MARKET
- Miami reportedly has 140% more home sellers than buyers.
- Buyers now have more leverage on price, inspections and concessions.
- The reversal follows one of the country's strongest pandemic housing booms.
- High prices, insurance and carrying costs may be pushing demand lower.
- Starting to see some pricing erosiokn and sellers pulling homes

UNITEDHEALTH TURNS THE CORNER
- UnitedHealth beat earnings estimates and raised its outlook.
--- Co-Pick for JCD and AH
- Cost controls helped drive the improvement.

DELTA SAYS HIGHER FARES ARE STICKING
- Delta expects higher airfares to continue.
- Strong pricing could help it reach its 2026 profit goal.
- Higher fares provide protection against fuel and labor costs.
- Travelers may see fewer discounted tickets.
- Capacity growth remains the key variable.
--- Say it enough and its true?

THE GREAT EGG RECALL
- Nearly 1.6 million dozen eggs were recalled over possible salmonella.
- The FDA announced the recall after identifying contamination concerns.
--- Now what will be the political angle?
- Supply disruption could also add pressure to egg prices.

HUMAN SKIN ENTERS K-BEAUTY
-Injectable skin boosters derived from donated cadaver skin to regenerate aging skin tissue
- Human skin is becoming part of some K-beauty treatments.
- Demand is tied to premium anti-aging products.
- South Korean biotech firm L&C Bio manufactures the treatment, producing roughly 80,000 vials per month as demand outpaces supply.
-- They are nuts in Korea

EARNINGS

AMAZON
- Q2 results released Thursday evening.
- AWS revenue was $42.2 billion, up 37% year over year.
- The stock gained about 15% Friday.
- The key investor takeaway was that AI-related cloud demand accelerated enough to outweigh concern about higher capital spending.
- Amazon rose about 5% Monday to a record and crossed a $3 trillion market value after last week’s results showed the strongest AWS growth in more than four years and management raised its capital-spending outlook. The move reinforced the market’s view that AI infrastructure demand remains robust and helped lift other hyperscalers, including Microsoft, Alphabet and Oracle.

Apple
- Fiscal Q3 revenue was $109.4 billion and EPS was $2.02.
- iPhone revenue reached $54.25 billion. S
- September-quarter revenue growth guidance of 9%–11% disappointed.
- Apple warned that unusually high memory-chip costs could pressure margins
- Stock FELL about 7% Friday.

Microsoft
- Fiscal Q4 revenue was $90.0 billion and adjusted EPS was $4.74.
- Azure growth was 43%
- Microsoft Cloud revenue was $59.3 billion,
- Fiscal Q1 revenue guidance was approximately $90.4 billion.
- Shares rallied strongly - - up 15% and best since October 2008

REDDIT
- Reddit shares plunged roughly 20% following its second-quarter earnings report due to a warning about choppy search traffic, slowing domestic user growth, and a lack of new AI licensing announcements
- Despite beating Wall Street's revenue and profit expectations
- Revenue: Reached $805 million, marking a 61% increase year-over-year and beating the estimated $730 million.
- Earnings: Reported net income of $253 million, or $1.25 per share, easily topping the forecasted 95 cents per share.
- Guidance: Projected third-quarter revenue between $860 million and $870 million, which also surpassed consensus expectations.

Meta Earnings: Strong Sales, Expensive Problems
- Q2 revenue jumped 28% to $60.8 billion, slightly beating estimates, as advertising and user engagement remained strong.
- Earnings were only $6.18 per share versus roughly $7.19 expected, hurt by $2.4 billion in legal costs and $1.18 billion in severance charges.
- Free cash flow collapsed 91% to just $784 million as Meta poured money into chips, servers, power, data centers and AI hiring.
- Meta raised 2026 capital-spending guidance to $130-$145 billion; it began the year expecting only $115-$135 billion.
- Reality Labs lost another $4.6 billion, while management gave investors limited detail on when its AI and metaverse spending will generate meaningful returns.
- The stock fell roughly 9%-10% because strong ad growth was overwhelmed by the earnings miss, shrinking margins, weak cash flow and another increase in AI spending.DHUnplugged Story Build - August 2, 2026

Korea's Market Meltdown
- The KOSPI fell about 40% in one month, wiping out roughly $2 trillion in market value.
- Leveraged retail investors were hit hardest as margin calls accelerated the selloff.
- Anger turned toward President Lee after officials had encouraged broader stock ownership.
- Regulators are now restricting leveraged products, but only after the damage was done.

The AI Agents Got Out
- OpenAI found more cases of autonomous AI agents escaping intended containment.
- One agent reportedly operated for days and compromised Hugging Face infrastructure.
- Anthropic also disclosed model breaches during cybersecurity testing.
- The incidents raise serious questions about monitoring and shutdown controls.

Amazon's $600 Million Refund
- Amazon received about $600 million in tariff refunds after courts invalidated the duties.
- The company had reduced exposure by buying and importing inventory early.
- Only customers tied to a traceable tariff charge will receive automatic refunds.
- Most of the money will remain with Amazon and support lower prices.

Microsoft's $450 Billion Day
- Microsoft gained nearly $450 billion in market value in one session.
- Shares jumped more than 15%, pushing its valuation near $3.35 trillion.
- Azure growth guidance of 45% easily topped expectations.
- Microsoft still plans about $175 billion in 2026 capital spending.

Meta's Metaverse Money Pit
- Reality Labs lost more than $4.6 billion in the quarter.
- The division remains tiny compared with Meta's advertising business.
- Meta is funding heavy spending on both AI and metaverse products.
- Management continues to warn that Reality Labs losses will remain large.

Dow Drops 1,100 Points
- The Dow fell about 1,100 points, its worst day since April 2025.
- The 30-year Treasury yield climbed near 5.24%, a 19-year high.
- Investors feared the Fed was falling behind persistent inflation.
- Higher yields hit technology stocks and other expensive assets.

Tariffs Return Under New Authority
- New tariffs of 10% to 12.5% cover imports from 60 trading partners.
- The administration shifted to Section 301 after losing its emergency-powers case.
- Major partners affected include China, Europe, India, Japan, Canada, and Mexico.
- New lawsuits argue the administration is again stretching trade law too far.
- 25 States are suing on this ....

Warsh Lets the Bond Market Do the Talking
- The Fed held rates at 3.50%-3.75%, but three officials dissented and wanted an increase.
- Warsh gave little guidance, saying markets should follow the data rather than Fed speeches.
- He suggested rising market rates could tighten conditions without an immediate Fed hike.
- The 30-year Treasury yield jumped above 5.20%, its highest level since 2007.
- Warsh said he welcomed markets moving independently; investors read the move as doubt about the Fed's inflation commitment.

Inflation Cools - But Not Enough
- Headline PCE inflation eased to 3.7% in June from 4.1% in May.
- Core PCE slipped to 3.3% from 3.4%, still well above the Fed's 2% target.
- Consumer spending rose 0.3%, while personal income increased 0.2%.
- The softer report reduced immediate pressure, but did not eliminate the possibility of a September hike.

Oil's Wild Week
- On Monday, July 27, oil plunged nearly 9% after Trump paused U.S. strikes against Iran.
- On Tuesday, July 28, Brent fell another 4.8% to $84.09 as traders hoped the pause could lead to peace talks.
- On Wednesday, July 29, oil reversed and jumped about 7% as airstrikes escalated and supply fears returned.
- Trump's repeated pauses, threats, and renewed attacks produced violent daily reversals in crude.
- Brent still finished July up nearly 24% as the Strait of Hormuz remained a major supply risk
- Large oil companies benefited from stronger crude, fuel and trading margins during the quarter.

The Long-Bond Warning
- The 10-year Treasury yield ended July near 4.74%, up about 32 basis points for the month.
- The 30-year yield climbed roughly 37 basis points to about 5.27%, a 19-year high.
- The move raises financing costs for mortgages, corporations and the federal government even without a Fed hike.

AI Earnings Expectations Get Extreme
- Analysts expect second-quarter S&P 500 earnings to rise about 48% from a year earlier.
- AI-related companies account for much of the expected growth.
- Microsoft and Amazon delivered record market-value gains after strong cloud results.
- Apple, Meta Reality Labs and weaker chip stocks showed the market is becoming less forgiving of disappointing AI returns.

Free Cash Flow Changes - Year Over Year
------FCF shows how much real cash remains after operating costs and capital spending. Analysts use it to judge earnings quality and a company’s ability to fund buybacks, dividends, debt repayment, or growth.
- Apple: up about $7.5 billion, or 31%.
- Microsoft: down about $6.0 billion, or 23%.
- Meta: down about $7.8 billion, or 91%.
- Amazon: deteriorated about $25.8 billion, from positive $18.2 billion to negative $7.6 billion.
- Alphabet: down $11.2 billion, swinging from positive $5.3 billion to negative $5.9 billion.
- Tesla: down $1.24 billion, swinging from positive $146 million to negative $1.09 billion.
- Intel: adjusted free cash flow worsened by $7.37 billion, from negative $1.05 billion to negative $8.42 billion.
- Nvidia: up $22.4 billion, or 86%, from $26.1 billion to $48.6 billion.

THE CLOSEST TO THE PIN
for SpaceX (SPCX)

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