The AI Rally Needs Cheap Money, and Cheap Money Is Scarce

Dear readers,

Yesterday’s earnings preview sorted companies by whether they generate cash or consume it. Today’s question is who can still borrow to fund growth. A weak market debut in Seoul has revived doubts about how the AI buildout is financed. Meanwhile, a power failure at Google’s London data center showed how few buildings much of the financial system depends on. The headlines matter less than the financing behind them.

AI Financing: Neoclouds Under Fire

Elice, a South Korean provider that rents out computing power for AI, lost about a third of its value on its first trading day in Seoul. The KOSPI, South Korea’s benchmark index, closed nearly 4 percent lower, and SK Hynix also fell sharply. Chip stocks had still rallied strongly on Monday.

CoreWeave was again under pressure in premarket trading. According to Wells Fargo, the credit market is pricing in a default probability of 19 percent per year and 65 percent over five years. The stock stands at $58.75 and is down a good 55 percent over twelve months.

The trigger is financing. TS Lombard warns that debt in the AI ecosystem could reach as much as $2 trillion by the end of 2027. Evercore ISI sees the rally in serious danger if the yield on 10-year US Treasuries climbs from a little over 5.1 percent to 5.62 percent. The large cloud providers have announced roughly $730 billion in capital spending for 2026, up from about $410 billion the year before.

Holders of Nvidia, AMD or Micron therefore need, above all, reliable statements from customers about their budgets. Meta provides them on Wednesday after the US close, and Microsoft and Amazon follow the week after. Nvidia CEO Jensen Huang also speaks on Wednesday.

Google Cloud: A Power Failure Takes Down Banks

A “power event” in Google’s London cloud region knocked out at least 30 services this morning. Payments provider Revolut, whose 80 million customers reported disruptions, was hit, as were Lloyds, HSBC, Spotify, Royal Mail, DPD and the video links used by British courts. Revolut said customer funds and data were safe.

Google reported at 12:12 p.m. British time that the root cause had been fixed. Full restoration of existing applications was scheduled for 2 p.m.

The incident exposes how much critical infrastructure sits with a handful of providers. A single power failure in one zone was enough to disrupt payments and the courts. That strengthens the case for extra spending on resilience, which in turn feeds the data center boom. Pressure is also rising on banks and regulators to disclose their dependencies. No share-price reaction has been reported so far, and the investment thesis is untouched.

Stablecoins: Mastercard and Visa Build the Pipes

At the Money20/20 USA trade show, Mastercard unveiled “Stablecoin Security.” Before a transfer in stablecoins, which are cryptocurrencies pegged to the dollar, the interface generates a risk score. It checks for fraud and sanctions exposure, drawing on Mastercard’s own payments data and blockchain analytics.

The first partners are Borderless.xyz and Keyrails. The rollout starts in North America, with a global launch planned for 2027. Mastercard acquired BVNK in August for up to $1.8 billion. Visa is moving its prefunding of payouts in stablecoins from pilot to regular operation, with Inyo Global as the first partner.

Should investors sell immediately? Or is it worth buying Mastercard?

The numbers show why the companies are investing. End-user stablecoin payments rose 45 percent to $482 billion between January and September 2026, even though the circulating supply barely grew, at about $305 billion. The growth comes from usage, not from new money. The payment giants want to supply the security and settlement layer.

Mastercard stock stands at $617.50, close to its annual high of $622.49. Circle, the issuer of USDC, trades at $80.44 and is down about 36 percent over twelve months. The company is now the first “significant” e-money token issuer under the EU’s MiCA regulation. Direct supervision by the European Banking Authority (EBA) begins on November 12.

General Motors: Good Numbers, No Guidance Increase

GM beat expectations on revenue and profit in the third quarter. The stock still fell more than 6 percent in premarket trading and now stands at $77.51.

Revenue came in at $50.0 billion. Adjusted EBIT rose 22 percent to $4.1 billion, and adjusted earnings per share were $3.70. Reported net income (GAAP) climbed from $1.3 billion to $3.3 billion, driven by pickups, where sales in the light-duty segment rose 9.3 percent.

The problem is the outlook. GM narrowed its 2026 adjusted EBIT guidance to $14.5 billion to $15.5 billion, from $14 billion to $16 billion before. The midpoint of its adjusted earnings guidance, $13.25 per share, sits below the consensus of roughly $13.4. US electric vehicle sales fell about 62 percent, and revenue in China dropped about 60 percent in the quarter.

As consolation, GM announced a new $20 billion share buyback program. The quarterly dividend is $0.18. The share count has fallen from 904 million to 849 million since the end of 2025. The buyback supports earnings per share, but it does not carry the operating growth story.

Fed Pause, December Hike and a Bitcoin Without Buyers

The Federal Reserve is expected to hold still next week. In a Reuters poll, 94 of 100 economists expect unchanged rates of 3.75 to 4.00 percent on October 28, and all 100 expect a hike in December. According to CME FedWatch, the probability of an October hike has fallen to 17 percent, from almost 60 percent a week ago.

The dollar index slipped below 102. Worries about excessive AI spending are giving the bond market a tailwind. Oil, however, remains expensive: Brent is above $110 after attacks in Saudi Arabia and on freighters in the Strait of Hormuz.

Bitcoin is holding just above support at $81,000, at roughly $81,500. US spot ETFs took in about $527 million on Monday, but a negative Coinbase premium points to subdued demand in US trading. JPMorgan Asset Management projects an annual return of 10 percent for Bitcoin over ten years, yet still classifies it as highly speculative. If equity weakness persists, QCP Capital says the $80,000 mark could come under threat.

The Takeaway

This week hinges on two questions: Will the cloud companies stick to their spending plans, and will yields stay under control? Starting Wednesday, Meta, Lam Research and Texas Instruments offer the first answers, and the Fed meeting on October 28 sets the frame. Anyone invested in AI stocks should watch credit signals, not just quarterly figures.

Best regards,
The StocksToday.com Editorial