AI rally fades as Elice IPO plunges

Hello, Leonie Kidd here, with today’s edition of Morning Squawk.

Wall Street’s rally in support of AI has hit a wall in Asia and Europe, darkening the neo-clouds on the horizon. Today, the focus is more on profits, with Netflix and SpaceX in the spotlight.

U.S. stock futures are giving up some of their optimism overnight after AI stocks rebounded Monday, as a sharply negative session in Asia showed nervousness persisting around tech stocks.

A negative close for CoreWeaveas well as high returns on Oracle debt, reveal ongoing credit issues in AI trading.

International sales: South Korea’s Kospi led broad declines in Asia, closing in bear market territory. Meanwhile, across Europe, tech stocks pushed indexes into the red during the morning session.

Problematic IPO: South Korean AI data center company Elice debuted as a small IPO on the country’s secondary market, but its shares fell more than 30% in its stock market debut.

• Why it’s important: Other data center companies have canceled IPO plans, including Nvidia-backed Firmus, Blackstone-backed AirTrunk, and Softbank unit SB Energy.

• Analysis: Gartner chief forecaster John Lovelock, author of the report that fueled last week’s rout, maintains his view, saying: “Everyone in the AI ​​race is fighting for a win.” last man standing position. Nearly every market Gartner tracks in our AI race is likely to collapse and become a duopoly. »

Shares of neocloud companies fall in premarket trading. CoreWeave remains the eye of the storm, giving up its relief rally despite an upgrade from Goldman Sachs, which described the stock as being “toward the top of quality rankings in the ecosystem.” HSBC disagrees, saying late Monday that shares could fall another 36% due to rising borrowing costs and slowing revenue growth from AI models.

• It’s been 39 years since Black Monday, but Jim Cramer says the market can learn important things lessons from there to the middle of selling AI. He also says investors should be wary of hedge fund liquidations and their role in recent declines.

$111 oil: Brent crude, the international oil benchmark, hit its highest level since May on Tuesday as attacks by Iran and its proxies intensified in the Middle East. Trade between Ukraine and Russia on energy infrastructure does not help the situation either. Ukrainian President Volodymyr Zelensky is due to meet US envoys Steve Witkoff and Jared Kushner in Norway today after President Donald Trump again called for appointing a new leader for the country.

Two huge indicators for the tech space today, with Netflix And EspaceX both published after market close.

Swim upstream: Netflix is ​​expected to post 40% profit growth in the third quarter, according to LSEG. But with major changes in senior management and a significant round of job cuts, Netflix investors will be looking to the hiring prospects.

• Netflix stock has been trading lower after its last five quarterly reports.

A difficult act to follow: Elon Musk’s pledge to give every American child a share of SpaceX stock next year sets the stage for today’s profits. This is only the second time the group has reported earnings as a listed company, and although shares are trading above the IPO price of $135, they are still below post-debut highs.

• Follow CNBC’s live blog on SpaceX earnings, which goes live at 9 a.m. ET here.

Nvidia is investing in Europe, committing nearly $10 billion to companies, universities and research institutes in the region.

Jensen Huang announced a new collaboration with Germany, toasting with Chancellor Friedrich Merz after unveiling strategic cooperation with the Berlin government.

• Why it’s important: Huang’s European tour has seen him invest in numerous start-ups, including Genesis AI, Agile Robots and Reflex Aerospace, while Mistral AI remains a key partner.

• Analysis: Nvidia is looking to accelerate AI adoption outside the United States, but Europe’s reputation for regulation could hamper development across the continent.

What is making Europe angry?

Anger over the cost of living and pressure on public services have driven hundreds of thousands of protesters onto the streets of several European countries, with grievances ranging from expensive housing to poor conditions at schools and universities.

France saw the largest protests this weekend, with more than 500,000 people. Most protested peacefully, but some looted and vandalized stores, burned city halls and attacked police.

Separate protests also took place on Saturday and Sunday in Italy, Spain, Portugal and Albania.

— CNBC’s Caleigh Keating, Kai Nicol-Schwarz, Lora Kolodny, Liz Napolitano, Sawdah Bhaimiya and Jenny Lee contributed to this report.

John Melloy edited this edition.