Korea's Chip Selloff Tripped a Trading Curb. Two Banks Backed Only $1.3 Billion of a $5 Billion AI Loan.

Chips Fell Again Before the Open as Bonds Got Their First Session Since Friday

Nasdaq 100 futures were down about 0.7% near 7:50 a.m. Eastern as chipmakers kept falling. S&P 500 futures were little changed, and Dow futures were higher.

The 10-year Treasury yield fell about 5 basis points to near 5.19% early Tuesday, the first cash session since Friday, CNBC reported. Brent crude was down 1.9% at $104.63 a barrel at 6:49 a.m., Reuters reported, as traders weighed more Russian diesel. The full Russian pledge would cover a little over nine days of U.S. diesel demand.

JPMorgan Chase (JPM) opened bank earnings season. Its third-quarter profit rose to $5.57 a share from $5.07 a year earlier. Earnings and revenue still came in below analysts' forecasts, CNBC reported.

Investor Signal

Broadcom's chief says buyers of AI computing still want more than suppliers can build. Tuesday's selling hit chipmakers hardest, as investors weighed both the cost of financing the buildout and a Chinese memory challenge. September consumer prices arrive Wednesday. A hot reading would raise borrowing costs again, the constraint he named this week.

Korea's Market Tripped a Trading Curb as the Chip Selloff Moved to Asia

Korea's Kospi fell 5.46% to 6,035.35 on Tuesday, its fifth straight loss. Less than an hour in, a 5% drop in Kospi 200 futures halted program trading for five minutes, the first such curb in about two months.

SK hynix fell about 10% and Samsung Electronics about 7.4%. Hong Kong rose 0.30%.

Tuesday's drop followed another chip selloff in New York on Monday, where optical networking makers fell hardest. Ciena (CIEN) dropped 9.95% and Lumentum (LITE) 9.78%. Broadcom (AVGO) slipped 1.88%.

That day, Broadcom chief Hock Tan said demand for computing exceeds supply and could stay that way through 2029. He also said capital "might be the biggest constraint." A report that China's CXMT made progress on a denser memory design added pressure on memory makers.

Investor Signal

No supplier has reported a change in orders. One reading is that investors repriced how fast customers can pay. Profit-taking and CXMT's progress fit the moves too. ASML reports Wednesday and Taiwan Semiconductor Manufacturing on Thursday. A cut to either one's outlook would turn a funding worry into an order problem.

Two Banks Backed Only About a Quarter of a $5 Billion AI Loan

JPMorgan and Goldman Sachs (GS) underwrote $1.3 billion of a $5 billion loan for Volta Infrastructure, an AI cloud startup, Bloomberg reported Monday. They did not underwrite the other $3.7 billion, which finances roughly 36,000 Nvidia (NVDA) chips.

The loan is being marketed at about 11%. Price talk widened during marketing, from a spread of about 5 percentage points in September to 6.25 to 6.50 points. The debt has no credit rating, which keeps out most collateralized loan obligations, the biggest buyers of leveraged loans.

Commitments are due Wednesday.

Investor Signal

This is the capital constraint at the level of a single loan. Two of the banks reporting this week declined to put their own balance sheets behind the chip piece. Chips lose value fast, the borrower has no operating history and the debt is unrated. Final pricing after Wednesday's deadline will show whether lenders take the chip loan at 11% or demand more.

Event Contracts Still Price December, Not October, for the Next Fed Hike

Kalshi's contract on an October rate increase last traded at 17 cents at 4:14 a.m. Eastern. It had touched 19 cents Monday, the day Cleveland Fed President Beth Hammack called for a restrictive stance. Kalshi priced a December hike at about 74 cents early Tuesday.

Fed Governor Christopher Waller spoke Tuesday at Bloomberg's New Economy Forum in New Delhi. He said higher long-term yields are doing "a little bit of the work" of tighter policy. He also said the AI buildout is having an impact on yields, reflecting stronger growth.

Investor Signal

The contracts treat the next hike as a question of timing. Waller's argument is that higher yields, which he partly links to the AI buildout, are already doing some of the Fed's work. That case favors waiting, as long as inflation cooperates. September prices are expected to be about 3.6% above a year earlier, according to FactSet. A hot core reading would put October back in play.

Bets on a Memory-Chip Stock Saw More Crypto Liquidations Than XRP

About $803 million of leveraged crypto positions were liquidated in the 24 hours to early Tuesday, CoinGlass data show. Bets on higher prices made up about 86%.

Perpetual futures tied to SanDisk shares saw about $19.1 million of liquidations, slightly more than XRP's $18.8 million. Several crypto exchanges now list such contracts on U.S. stocks.

Bitcoin hit $80,960 in the hour Seoul opened, then rose to near $83,660 by 4:45 a.m. Eastern. Spot ether funds had a 10th straight day of outflows on Monday, losing $85.4 million.

Investor Signal

Chip-stock swings now reach crypto venues directly. As memory stocks fell in New York and then Seoul, leveraged bets on crypto venues were forced out too. The rebound came without U.S. fund buyers, and the Coinbase premium has been negative for 20 straight days. Daily fund flows will show whether the bounce draws them back before Wednesday's inflation report.

A Hotel Owner Trades Below Its Pre-Bid Price, Three Days Before a $2 Billion Offer Expires

Service Properties Trust (SVC) fell 17.06% on Monday to $5.93. That is below its $6.22 close on Oct. 8, the last session before TKO's proposal became public.

TKO, which describes itself as a privately held real estate investment firm, offered $2 billion in cash for SVC's owned hotels, with no financing contingency. The bid is about 2.6 times SVC's $768 million market value.

Most of the letter is nonbinding. TKO's $15 million deposit would stay refundable through due diligence. SVC would keep its debt and pay any costs to end its Sonesta management contracts. The offer expires at 5 p.m. Eastern on Friday.

Investor Signal

The stock now trades below its pre-bid price, and no SVC, TKO or other disclosure explains the drop. As with the AI loan, proof of the money matters, and no evidence of TKO's financing has been made public. Proof of funds, a Sonesta cost estimate or a board reply before Friday would add clarity.

Broadcom's chief says buyers of AI computing still want more than suppliers can build. Tuesday suggested the strain may sit in the money. Korea's chipmakers fell hardest, two big banks declined to underwrite the chip piece of an AI loan, and stock-linked bets were forced out on crypto venues. Event contracts still price a Fed that waits.

Wednesday brings the inflation report and the deadline for the AI loan. Both will show what that money now costs.