AI's Lenders Flinch | TSMC Plans Carefully for 2027 | Bonds Rallied After a Hot Print | A Blockade Bet Slid

The AI selloff deepened on Thursday, while bond yields kept falling.

S&P 500 futures slipped about 0.3% early Thursday, and Nasdaq-100 futures fell about 1.2%. Dow futures rose about 0.3%. The 10-year Treasury yield fell to about 5.1%, a three-week low. Brent fell about 1.4% to near $104.50, gold rose about 1.8% to near $4,180, and bitcoin traded near $80,900.

Bitcoin fell overnight even as the odds of an October Fed hike faded. U.S. spot bitcoin funds had $261.4 million of net outflows on Wednesday, after about $176 million of inflows on Tuesday.

Bonds found buyers. AI's borrowers did not.

The AI selloff has moved from stocks into the market that insures debt.

The cost of insuring AI borrowers' debt against default hit records overnight. Swaps on Oracle (ORCL) debt widened 26 basis points to a record 288, S&P Global data showed. CoreWeave's swaps passed 1,000 basis points, and its bonds due 2032 traded near 77 cents on the dollar. Swaps on several of the largest tech companies also hit record wides, at far lower levels. South Korea's Kospi fell 7.6% after tripping a circuit breaker, and Japan's Nikkei closed down 4.9%.

TSMC posted a record quarter overnight and said it is planning cautiously for 2027. Net income rose 69% from a year earlier to NT$763.1 billion, ahead of forecasts. Revenue of $46.72 billion topped its own guidance, and it expects fourth-quarter sales to rise about 14% at the midpoint. Chief Executive C.C. Wei said TSMC is being "prudent" in its planning for 2027. Its U.S.-listed shares were down about 2% before the open.

Demand Strong, Funding Dear

TSMC still describes AI demand as extremely robust, and its sales guide points higher. The strain sits with the companies that borrow to buy capacity. Default insurance on Oracle and CoreWeave priced that strain overnight, and Seoul's chipmakers fell the same night. If index credit spreads follow the single names wider, new data centers get more expensive to fund. If they hold, the stress stays with the most leveraged builders.

Prices ran hot, yet longer-term Treasury yields ended the day lower.

September consumer prices beat forecasts, and the 10-year yield still finished Wednesday lower. It touched about 5.33% after the report and closed at 5.19%, down two basis points. The two-year yield rose three basis points to 4.82%. Futures put the chance of an Oct. 28 rate hike near half on Wednesday morning, then about 26% overnight, CME FedWatch data showed. Producer prices and retail sales for September are due at 8:30 a.m. Economists expect producer prices up 0.5% on the month and retail sales up 0.3%.

Private investors are still paying up for AI computing capacity. Modal raised $750 million at a $15.75 billion valuation, about 3.4 times its May price. The company says it has passed a $1 billion annualized run rate, which is not audited revenue.

Cheaper Money, Pricier Risk

A hot inflation report lifted short-term yields and left the 10-year lower. Lower Treasury yields have not eased borrowing costs for AI's most indebted builders. Modal's price was set privately and is tested far less often than CoreWeave's bonds. Strong retail sales this morning would argue for higher yields again. A weak report would side with the bond rally.

Oil fell overnight, even as two more ships hit in Gulf attacks went down.

Brent fell faster than U.S. crude overnight, narrowing the gap between the two benchmarks. Washington is weighing easing sanctions on some shadow-fleet tankers, a U.S. official told Reuters. The aim is to let them carry "legal oil" out of the Gulf. Saudi Arabia pumped 8.3 million barrels a day in September, the International Energy Agency said. That was up from about 6 million in August. Singapore said the container ship GFS Pride sank after what it described as a projectile strike, with all 21 crew safe. Iran's Revolutionary Guards say the ship hit a mine. Data from the UN shipping agency showed the Cape Dao, a bulk carrier hit in September, also sank.

Diesel is carrying the oil shock into the wider economy. Household fuel oil prices rose 15.3% in September and are up 74.2% from a year earlier. Higher oil prices came up in every Fed district report in the Beige Book, and firms are adding fuel surcharges. A Ukrainian drone attack set Russia's Ryazan refinery on fire overnight, the regional governor said.

Cheaper Crude, Sticky Costs

Crude fell overnight with no single cause. Gulf supply is recovering, and Washington may free up more tankers. Costs already in the pipeline keep moving through surcharges and contracts as they reset. A lasting drop in crude would slow that pass-through only with a lag. Another sinking or refinery strike could reverse the overnight move quickly.

Polymarket's contract on a U.S. announcement ending the naval blockade of Iran by Oct. 31 fell to about 7.5 cents.

It had held at 12.5 cents through Wednesday afternoon. Kalshi's October rate-hike contract traded between 23 and 27 cents early Thursday, down from a 55-cent peak Wednesday.

Two Bets, One Night

The blockade contract stepped down overnight, hours after Singapore said the GFS Pride had sunk. It pays on an official U.S. announcement, not on ships moving through Hormuz. The Fed contract gave back most of Wednesday's jump while bonds rallied. Neither price is evidence of the outcome.

Thursday opens on a split between AI demand and the cost of funding it.

TSMC posted a record quarter, and Oracle's default insurance hit a record. Bonds rallied after a hot inflation report, and hike bets faded. Oil fell even as two more ships went down. This morning's data will show whether the bond market's read holds.

Capital moves early. Coverage catches up. The gap between the two is worth watching.