DHunplugged #818: Cyberdyne IRL

It’s the end of the world and we know it…

CPI numbers – HOT – Markets think hit a top – or just options Friday?

Sell Rosh Hashana and Buy Yom Kippur?

Plenty of AI

PLUS we are now on Spotify and Amazon Music/Podcasts!

Click HERE for Show Notes and Links

DHUnplugged is now streaming live - with listener chat. Click on link on the right sidebar.

Love the Show? Then how about a Donation?

Follow John S. Dvorak on X

Follow Andrew Horowitz on X

Warm-Up

- Follow Up - I am the House! - 10YR shot above 5% on Monday

- Follow Up 2 - Straight of Hormuz - NO Boats passing (can we please stick to the facts?)

- CPI numbers - HOT - Markets think hit a top

- Let's talk end of the works - Cyberdyne IRL

Markets

- 100% Probability of a rate hike this week

- Sell Rosh Hashana, Buy Yom Kippur

- HACK ETF - Cybersecurity name up 49% YTD

DHU MAILING LIST! - Go to DHUnplugged.com

FED HIKE IS BACK

- Fed meets Tuesday-Wednesday, with a 25 bp hike to 3.75%-4.00% now the dominant expectation.

- 85% of economists surveyed expect a hike; futures moved to roughly 90% odds after the latest inflation data.

- August CPI rose 0.4% month-over-month and 3.4% year-over-year; core rose 0.3% for the month and 2.4% annually.

- Markets are increasingly pricing additional tightening beyond September rather than this being a one-and-done move.

AND -> THE 5% TREASURY IS BACK

- The 10-year Treasury yield briefly crossed 5% Monday for the first time since 2023.

- Higher oil prices, hotter inflation, heavy bond supply and expectations for more Fed tightening are all pushing yields higher.

- The move raises the hurdle rate for stocks while feeding directly into mortgages, corporate borrowing and other credit.

- Bonds are becoming meaningful competition for equities again at a time when stock valuations remain elevated.

SLOW DOWN THE AI

- Anthropic CEO Dario Amodei called for deliberately slowing frontier-model advancement to create more time for safety controls.

- Sam Altman and Elon Musk publicly backed the push for more caution; Microsoft separately released a draft AI code requiring models to remain under human control.

- Microsoft says its models must accept shutdowns and corrections and should not be designed around claims of consciousness or legal rights.

- The semiconductor index dropped more than 5% Monday; Nvidia, Broadcom, Micron and AMD were among the major casualties.

DEEPSEEK CHANGES THE MEMORY MATH

- DeepSeek's latest architecture sharply lowers the amount of memory required to run inference, including a major reduction in KV-cache requirements.

- This is not simply HBM being replaced by SSD: the architecture reduces both high-speed memory and persistent-storage requirements per inference.

- That complicates the straight-line thesis that every incremental AI token requires proportionally more HBM and storage.

- Micron, Samsung and SK Hynix still benefit from enormous AI memory demand, but will efficiency gains become an important counterweight to unlimited-demand forecasts?

V4V - What is it and how can you participate?

TOKENS - A Quick Tutorial

ORACLE SAYS THE AI SPENDING IS REAL

- Oracle booked more than $30 billion of new AI cloud contracts during the quarter, taking total backlog to $664 billion.

- Revenue rose 30% to $19.3 billion and adjusted EPS came in at $1.92 versus $1.74 expected.

- Oracle spent $28.5 billion on capex, but about $11.36 billion was offset by customer prepayments.

- Most new AI orders use prepayments, customer-owned hardware or similar arrangements, reducing the amount Oracle itself must finance.

AI STOCKS MEET THEIR FIRST REAL NARRATIVE PROBLEM

- The Philadelphia semiconductor index dropped roughly 5.4% Monday even though it remains up about 58% for the year.

- Nvidia fell roughly 2.6%; Broadcom, Micron and AMD were each down around 4% during the session.

- The new concern is not whether AI works, but whether safety restrictions could slow the pace of model releases and infrastructure spen