The implications of Amazon's $25B bond sale, and Microsoft's evolving AI model strategy
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There's a big bifurcation in the market on Tuesday. While the S & P 500 is only slightly lower in the session, the tech-heavy Nasdaq 100 dropped more than 1% due to another selloff in the AI chip leaders and data center infrastructure build out stocks. Four trading sessions into July and the third quarter, the market already looks very different from the spring. The Philadelphia Stock Exchange Semiconductor Index (SOX) has traded lower in three of those four sessions, and the down days have been sharp, with an average decline of roughly 5.3%. New narratives like Club name Meta's plan to sell AI compute have created some jitteriness around the longevity of the hyperscalers' AI capex cycle, and investors have responded by selling year-to-date tech winners and the parabolic moves that formed at the end of June. But as far as we can see, nothing has fundamentally changed in the past week. Another headline is Amazon's plan to raise at least $25 billion through an eight-part bond sale. Hyperscalers raising money to fund their AI investments isn't a novel concept, and Amazon has raised roughly $64 billion across offerings earlier this year. But what's notable is that the company doesn't plan to issue any more debt this year after this, sources told CNBC's David Faber. If this is its last debt raise for 2026, does it mean Amazon won't raise capital expenditure expectations again this year? Or, if Amazon is done raising debt this year, is an equity sale — like we saw with Alphabet — in play? You can spend a lot of time trying to draw the right conclusion, but we'll get more clarity in a few weeks when the company reports earnings. Amazon shares are up roughly 0.7% in afternoon trading. Here's one more headline to chew on: Microsoft has started to replace models from OpenAI and Anthropic with internal models in Microsoft Office products like Excel and Outlook, according to a report from Bloomberg News . The goal here is to reduce reliance on outside models, which can be costly. This shouldn't come as a surprise to anyone who read CEO Satya Nadella's interview with The Wall Street Journal last month. We discussed it on the Homestretch on June 22, noting that Microsoft was seeking lower-cost alternatives. It's simple: Microsoft users don't always need access to the most powerful models to complete tasks on software products like Outlook. The company looking to reduce AI costs isn't enough to make us more positive on the stock, but it's worth noting because others may follow. Elsewhere in the market, U.S. oil benchmark WTI crude moved back above $70 per barrel after it was reported that Iran attacked an oil tanker in the Straight of Hormuz, the vital waterway for the global energy trade. The bounce in oil combined with the New York Federal Reserve's June survey of one-year consumer inflation expectations increased from May to its highest level since September 2023, pushing bond yields higher. The 10-year Treasury yield is on pace to close above 4.5% for the first time since June 22. There are no major U.S. earnings after the closing bell on Tuesday or before the opening bell on Wednesday. Weekly mortgage applications and the minutes from the June Federal Reserve meeting are in store for Wednesday. Expect traders to comb through the Fed minutes for clues about how the now Kevin Warsh-led central bank is thinking about monetary policy in the second half of the year. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. More In Homestretch Here's our plan for both Honeywell stocks after a divergent first week of trading Jeff Marks Our diversified investing style proves its worth as the AI trade stumbles again Jeff Marks 2026 laggards shine in Wednesday's mixed stock market that kicked off the third quarter Jeff Marks Read More
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