“Morning Call Sheet: AI, rates and affordability test markets” — watch on CNBC
Brent Kochuba, founder of SpotGamma, joined CNBC on September 29 to discuss the AI trade market breadth split and why Micron is the next test.
The Nasdaq has held its ground for two weeks while almost nothing else has. Brent Kochuba, founder of SpotGamma, joined CNBC’s call sheet panel to explain why the AI trade’s market breadth leaves the equity market leaning heavily on a single group of stocks.
Small Caps Fell While The Nasdaq Rose
Over the past couple of weeks, small caps in IWM dropped roughly 6% to 8% and the Dow dropped about 6%, while the Nasdaq gained about 2%. That is an eight-to-ten point spread between the index that carries the AI names and the ones that do not.
Index members have stopped trading together, which is the dispersion that shows up when correlation falls. When correlation breaks down like this, the headline index no longer serves as an accurate measure of what most constituent stocks are actually doing.
Revenue, Not Regulation, Is The Real Risk
The panel spent most of the segment on who should regulate AI. Brent reads the binding constraint as revenue instead. Token prices keep falling, so the product these companies sell gets cheaper while the capital spending stays enormous.
He reads Anthropic’s projected revenue as roughly flat, which leaves the question of when that IPO arrives wide open. For equities the test is narrow: AI spending has to produce revenue that justifies it.
Micron Earnings: Now An Index Input
Micron reports earnings on Wednesday, and the result matters well beyond the ticker. When a handful of AI names carry an index, one company’s print sets the risk for the whole market. This is why SpotGamma watches the implied move on a name like Micron as an index input rather than just a single stock.
Ahead of earnings, implied volatility runs rich for the stock. Once results clear, that premium drains away in the IV crush, and hedges bought for the event lose value fast.
Watch the full segment on CNBC.
Brent appears regularly on CNBC.