Lam, Tesla and Meta Clear the Bar and Still Get Sold

Dear readers,

Wednesday’s open question got its answer overnight. Lam Research told investors that global spending on chipmaking equipment will top $200 billion in 2027, and the stock fell about 8 percent in premarket trading anyway.

Tesla and Meta also beat expectations and were sold, and IBM is slipping despite a profit beat. Investors no longer want promises for 2028. They want AI spending that earns money now. Brent above $110 adds the fear of higher rates.

Lam Research: A Record Quarter, a Cautious Outlook

The chip equipment maker reported record September-quarter revenue of $8.22 billion, up 54 percent from a year ago. The adjusted operating margin reached 40.2 percent, the first time above 40 percent. Adjusted earnings came to $2.20 per share, or $2.19 on a reported (GAAP) basis.

The problem is the guidance. For the December quarter, Lam is targeting revenue of $8.6 billion, barely above consensus. Management warns of component shortages, and some deliveries will slip into the March quarter of 2027. China accounted for 35 percent of revenue recently, and that share is expected to fall significantly.

The long-term case is intact. Management expects global spending on chip fabrication equipment of more than $200 billion in 2027, up from roughly $150 billion this year.

Needham cut its price target from $390 to $290 but stays at “Buy.” Evercore ISI trimmed its target from $355 to $315 (“Outperform”), and Goldman Sachs reiterated “Buy” with a $380 target.

The stock has fallen 16 percent in 30 days and sits well below its June high. Much is already priced in, so any softening in growth gets punished at once. The damage spread across the memory chain. In Seoul on Thursday, Samsung and SK Hynix lost 4 and 5.5 percent, and the Kospi fell more than 3 percent.

Nvidia CEO Jensen Huang pushed back, saying he sees no memory glut through 2029 and that the world “can always use more of it.” The demand is there, but delivery capacity is the constraint, and investors in this sector need strong nerves.

IBM: Software Recovers, AI Skepticism Lingers

IBM made up roughly two thirds of the large deals that slipped out of the second quarter. Third-quarter revenue rose 5 percent to $17.1 billion. Adjusted earnings of $2.95 per share compare with a consensus of $2.86. Software grew 8 percent. IBM raised its software growth forecast to 7 to 8 percent and now expects free cash flow to grow by more than $1 billion.

The stock is lower anyway, at about $236 against $251 at Wednesday’s close. Consulting stagnated, and the adjusted gross margin of 58.5 percent missed the expected 59.1 percent. The CEO also warned that large corporate clients are scrutinizing the returns on their AI spending more closely. That hits IBM’s consulting arm hardest, since AI accounts for about 30 percent of revenue there.

Analysts remain friendly. Citi raised its target from $245 to $280, and Barclays from $262 to $277. The stock is down a good 15 percent this year and demands patience. Buyers are betting on a further recovery in core software, and the consulting weakness remains the risk.

Tesla and Meta: Who Saves, Who Pays

Tesla and Meta took opposite routes and landed in the same place.

Tesla is cutting 2026 capital spending to roughly $20 billion, from more than $25 billion before. It also slashed its 2030 target from 20 million vehicles to 5 million.

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

Adjusted earnings of $0.48 per share beat the $0.43 consensus, yet the stock fell about 5 percent in premarket trading. Operating income dropped 56 percent.

Meta grew 26 percent to $64.6 billion in revenue, powered by AI-driven advertising. Free cash flow turned negative, at minus $2 billion, for the first time in more than ten years.

Capital spending for 2026 is guided to $135 billion to $145 billion, on top of $825 billion in commitments for AI infrastructure. A 2-for-1 stock split hardly distracts from that. The shares trade near $676, against about $698 at Wednesday’s close.

The market is punishing both. Falling investment signals shrinking growth ambitions, and rising investment comes without the payoff. For investors, the lesson is that good headline numbers do not carry a stock. Verifiable cash flows do.

Oil, Rates and Bonds: Macro Pressure Builds

Brent has climbed to its highest level since May, clearly above $110, after Houthi attacks on Saudi targets. A report of possible US-Israeli strikes on Iran after the November 3 midterm elections adds to the unease. That feeds inflation worries. US consumer prices rose 3.7 percent in September, and producer prices climbed 1.3 percent from the prior month.

The Fed decides on October 28. In a Reuters poll, 94 of 100 economists expect a pause at 3.75 to 4.00 percent, and all 100 expect a hike in December. The yield on 10-year Treasuries recently fell to about 5 percent as investors sought shelter. Gold slipped below $4,100 as higher rates weigh on the metal.

Europe has its own problem in France, where the yield gap between French and German government bonds has widened to its highest since 2011. The DAX held up comparatively well with a slight loss.

An oil shock combined with tight monetary policy hits richly valued growth stocks hardest. A December hike is now consensus, so a surprise in October would be a fresh stress test.

Bitcoin: $80,000 Holds, but Buyers Are Missing

Bitcoin trades near $81,600 (about €72,700). After a push toward $85,000, it slipped about 3.6 percent on Thursday. The $80,000 mark matters because it is roughly the average cost basis of US spot ETFs and listed holders such as Strategy. Buyers tend to gather there.

Inflows are fading. On Monday, BlackRock’s IBIT took in $665 million, its largest daily inflow since January. Across all US spot ETFs, Tuesday brought just $23 million. The next tests are Friday’s options expiry (the max-pain price, where buyers lose the most, is $82,000), the Fed meeting on October 28 and MSCI’s decision on November 11. That decision will determine whether Strategy and Metaplanet are removed from the index.

Bitcoin’s share of the total crypto market rose to 60 percent, the highest since May. Investors are fleeing into the sector’s leader, not out of crypto. As long as rate fears and oil set the tone, Bitcoin trades as a risk asset. A drop below $80,000 would push the treasury-holding companies into the red.

The Takeaway

Friday’s close will help show whether the pullback in tech and chips is a healthy correction. The next hard dates are SK Hynix earnings and the Fed decision, both on October 28, followed by US PCE inflation data on October 29 and the midterms on November 3. Buyers now should look for proof of cash flow, not promises of growth. Those who stay invested should keep a close eye on rates and oil.

Best regards,
The StocksToday.com Editorial