July CPI Lands In Line and Hike Odds Fall to 42%. Super Micro and CoreWeave Answer the AI Funding Question.

Wednesday, August 12, 2026, written at 9:20am Eastern, fifty minutes after the CPI release and ten minutes before the bell, so the marks below are live and several will move within the hour. The inflation print came in exactly where the street said it would, and the market has taken that as permission. It is not the most important thing that happened in the last eighteen hours. The most important thing is that Super Micro, CoreWeave and Nebius all reported inside that window, and between them they turned yesterday’s framing on its head. The question all week has been whether the AI buildout can be funded. The answer arriving this morning is that the order books got so much larger that the market has decided to stop asking.

Top Call: the Demand Number Outran the Funding Question

July CPI printed +0.1% month on month and 3.4% year on year, with core at +0.2% and 2.5%, all of it matching the Dow Jones consensus to the decimal. September hike odds on CME FedWatch fell to roughly 42% from about 52% yesterday morning. Yields pulled back, gold went to $4,493, and Nasdaq futures are up 1.02%.

Read the composition rather than the headline and the relief looks thinner. Energy fell 1.5% on the month and gasoline fell 2.9%, while shelter at +0.1% did roughly two thirds of the entire all-items increase by itself. In other words, the disinflation the market just bought was energy disinflation, delivered in a month when energy went down. Brent is at $89.53 this morning after a fifth consecutive session higher. Whatever July says about pass-through, August is being written right now at a very different oil price, and the committee can read a forward curve as well as anyone.

The equity story is cleaner and it is genuinely constructive. Super Micro guided fiscal 2027 revenue to $65 billion to $72 billion against $54.4 billion of consensus, a range whose bottom sits above the highest individual analyst estimate on the street. CoreWeave’s revenue backlog reached $104.2 billion, up 246% year on year, and management disclosed more than $25 billion of additional net new commitments booked in the first weeks of the third quarter. Nebius grew revenue 454%. Korea took the message and ran with it, with the Kospi up 3.7% to 6,579.04 and Samsung and SK Hynix both up more than 6%.

Our take: stay with the compute complex and treat the September rates repricing as unfinished business rather than settled. The demand evidence is now overwhelming and the tape is right to pay for it. The rates market, by contrast, has just cut hike odds by ten points on the strength of an energy component that has already reversed.

The Tape

Yesterday’s cash session was a broad fade into the print, with the S&P down 0.32% to 7,728.20, the Nasdaq Composite down 0.60% to 26,445.45 and the Dow off 184 points to 53,791.85. This morning has reversed all of it and then some, and the leadership is unambiguous: Nasdaq futures are running at double the S&P’s pace, which is the AI reporters rather than the CPI. Note also that small caps are participating at +0.63% today after two sessions of underperformance when the front end sold off. That is the cohort that trades the rate path most directly, and it is now trading a softer one.

Super Micro: the Guide Is Enormous and the Cash Flow Is Worse Than Anybody Wanted

This is the print of the cycle so far, in both directions.

Yesterday this note argued that Super Micro’s margin should be treated with care rather than celebration, because a server assembler does not double gross margin on execution. The 17.5% print confirmed the level, and management attributed it to a richer enterprise customer mix and broader adoption of the Data Center Building Block architecture. That is a mix story, which means it is repeatable only for as long as the mix holds. The stock is up about 9% and the market is treating the margin as structural. We would not.

The guide is the real event and it deserves to be taken seriously. Nobody moves a fiscal year forecast from a $54 billion consensus to a $65 to $72 billion range on optimism. That number is built from the more than $60 billion of new orders taken in the quarter and a record backlog entering fiscal 2027. Raymond James makes the sharpest observation available on it, which is that the order surge implies customers are largely looking past the export control indictment and the continuing investigation, risks that remain live and are nearly impossible to size from outside.

And then there is the line the enthusiasm has skipped over. Full-year operating cash flow was negative $6.8 billion, spent building inventory and capacity. Revenue guided to more than double again next year means that working capital drain does not shrink, it scales. Yesterday the question here was whether the funding answer would arrive as a convertible or an equity raise. It did not arrive at all, which is the third possible answer and the one that defers rather than resolves. A company guiding to $72 billion of revenue on a balance sheet that consumed $6.8 billion of cash in the year just ended will have to answer it eventually, and the market has handed it a much higher share price with which to do so. That is not a bear case today. It is a date on the calendar.

CoreWeave: the Backlog Was the Story, and So Was the Interest Line

Yesterday this note said the print turned entirely on backlog, that the street looked for roughly $104.4 billion against Cantor’s $131 billion, and that a print near $104 billion would read as deceleration even though it was a record. The number landed at $104.2 billion, at the low end of that dispersion, and the stock is up 18% pre-market. We got the mechanism right and the reaction wrong, and the reason is worth stating plainly rather than skipping past: management disclosed more than $25 billion of additional net new commitments signed in the first weeks of the third quarter. That single line reframes the whole disclosure, because it says the June 30 snapshot understated the run rate by roughly a quarter within six weeks. Backlog measured at a point in time is a poor instrument for a business signing contracts at this pace, and the market repriced the instrument rather than the number.

The interest line is where the discipline belongs. Net interest expense was $640 million in the quarter against $267 million a year ago, on revenue of $2.58 billion. A quarter of the top line now goes to lenders before depreciation on $9.4 billion of quarterly capex is counted, and the full-year capex range was raised to $35 billion to $39 billion with a target of more than 1.85 gigawatts of active power by year end. The net loss doubled to $626 million and the interest line explains most of the widening. This is the cost of capital showing up in the income statement rather than in a press release about a financing, and it is the same fact that Super Micro’s negative $6.8 billion describes from the other side of the balance sheet.

Our take: the demand disclosure is genuinely better than the setup implied and the stock deserves the move. What has changed structurally is that CoreWeave is now visibly a levered infrastructure business with an AI growth rate attached, and it should be valued as both. The number to track from here is not backlog, which the company has proven it can grow. It is interest expense as a share of revenue, currently 25% and rising faster than the top line.

Nebius: the Cleanest Growth Number in the Complex

Nebius reported before the open with revenue of $582.3 million, up 454% from $105.1 million a year ago, positive adjusted EBITDA, and a narrower adjusted net loss. GAAP diluted EPS from continuing operations swung to a loss of $0.68 from a $2.05 profit a year ago, which reflects the prior-year comparison rather than an operating deterioration. Full-year guidance holds at $3.0 billion to $3.4 billion of revenue with annualised run-rate revenue of $7 billion to $9 billion by year end, against $1.92 billion of ARR exiting the first quarter.

The reason this matters more than its market capitalisation suggests is the adjusted EBITDA line. Nebius is the smallest of the three neoclouds reporting in this window and it is the one that reached positive adjusted operating economics first, while guiding to roughly a fourfold increase in run rate over two quarters. If the bear case on this cohort is that renting GPUs is a structurally unprofitable business, the smallest operator just produced the least supportive evidence for it.

Memory and Korea: the Leveraged Expression Woke Up

The Kospi finished 3.7% higher at 6,579.04, with Samsung Electronics and SK Hynix both up more than 6% intraday and Kioxia adding nearly 4%. Buying was heavy enough to trigger a five-minute program trading curb, the twenty-third sidecar of 2026. Reports that Temasek is planning direct investment in Korean semiconductor leaders added to the move.

Two weeks ago Korea was the epicentre of the AI unwind, with the Kospi taking a 10.8% single-day crash and SK Hynix trading below its offering price. It has now recovered to 6,579. That round trip is the most honest available measure of how much of the recent drawdown was a positioning event rather than a fundamental one. Memory is the highest-beta expression of AI capex because it is the component with the least pricing flexibility and the longest lead time, and 2027 DRAM is already reported sold out. When capex expectations move, Korea moves first and furthest in both directions. The signal today is that CoreWeave raising capex to as much as $39 billion and Super Micro guiding to $72 billion of revenue both flow directly into someone’s memory order book.

Japan came back from Mountain Day quietly, with the Nikkei 225 up 0.14% to 67,062.98 and the Topix up 0.34%. Hong Kong is the laggard again, with futures pointing 0.4% lower, and the mainland is soft. The gap between Seoul at plus 3.7% and Hong Kong at minus 0.4% on the same session is the clearest statement anyone needs about where the region thinks the growth is.

Europe: Records Without Conviction, and Luxury Cracks

The Stoxx 600 is at 661.17, up 0.11%, holding the record territory it set yesterday at 660.8, with the Euro Stoxx 50 having closed 0.5% higher at a record 6,553. The DAX is at 26,357 and the FTSE 100 at 10,864, both roughly unchanged. The index level is being carried by semiconductors, with ASML and Infineon each up more than 60% in 2026 and among the largest contributors to the benchmark.

Underneath that, luxury broke down, with LVMH off 1.8%, Hermes off 1.5% and Kering off 2.9%. That divergence deserves a moment, because it is a statement about the European consumer and about China simultaneously, and it is arriving in the same week that Hong Kong and the mainland have underperformed every session. A Stoxx 600 at a record whose gains come from three chip names while its consumer franchises are being sold is not a broad bull market. It is the same narrow AI trade the United States is running, wearing a different index.

Oil and Geopolitics: Talks Called Advanced While the Shooting Continues

Brent for October delivery stood at $89.53 as of 08:00 GMT after rising more than 2% overnight, a fifth consecutive session of gains and roughly 24% above where it traded in late February before the war began. WTI is near $84.

The overnight news was violent rather than diplomatic. Houthi forces attacked a commercial vessel in the Bab al-Mandeb strait, killing six people including two members of a security force on a rescue mission. Separately, US Central Command disabled a Panama-flagged cargo vessel attempting to breach the American blockade of Iranian ports. Against that, Qatar’s Foreign Ministry described the Oman-Iran talks as being at an advanced stage, while Tehran maintains that the strait stays closed until Washington agrees to war reparations and the lifting of sanctions.

The number that settles the argument is the transit count. Ten vessels crossed the Strait of Hormuz on Monday against roughly 130 a day before the crisis. The US Energy Secretary has claimed a recovery to 9 million barrels a day of flow; independent estimates put the moving average nearer 7 million. Tim Waterer of KCM Trade put the market’s position accurately: hope for a deal has not been abandoned, but confidence is clearly eroding. Our reading has not changed. The premium is structural until vessel counts recover toward the pre-war baseline, and a second maritime theatre at Bab al-Mandeb is now taking casualties. Consensus support in the $85 to $90 band looks correct, and the risk to it is skewed higher rather than lower.

Macro Beyond the Headline: Real Wages Are Still Negative

Two details from the release that the market has passed over. Energy is 14.7% higher than a year ago, driven by a 24.6% surge in gasoline, and airline fares are up 25.5% over the same period. Food rose 3.0% over twelve months with food away from home up 3.4%. Motor vehicle insurance fell 0.3% on the month, one of the few large components declining.

Set that against wage growth pacing at 3.2% year on year. Headline inflation at 3.4% means real wages are still negative, which is the fact underneath every soft consumer print of the past quarter and the reason last Friday’s minus 23,000 payroll number is not an isolated event. The Fed is being asked to tighten into that, and Cleveland’s Beth Hammack made the hawkish case explicitly, writing that now is the time to act and that the longer the committee waits to bring inflation back to 2%, the more challenging it becomes. Chair Kevin Warsh is reported to remain open to a September move if the data run hot and markets begin pricing higher borrowing costs.

The tension is straightforward. Hammack is arguing about the 3.4% headline. The labour market is arguing about the 3.2% wage. Both are reading the same release.

Tonight: the Optical and Networking Reads

Coherent reports after the close and is the most informative print remaining this week for anyone underwriting the physical layer of the buildout. The company guided fiscal Q4 revenue to $1.91 billion to $2.05 billion against $1.90 billion of consensus, with non-GAAP EPS of $1.52 to $1.72 and gross margin of 39% to 41%. Consensus sits at $1.62 on $1.99 billion, roughly 30% revenue growth and 62% earnings growth. The drivers are 800G and rapidly ramping 1.6T transceivers, optical circuit switching, and early co-packaged optics revenue. If interconnect is the bottleneck people claim it is, the 1.6T ramp rate is where it shows up first.

Cerebras reports after the close with consensus of a $0.19 loss on $193.68 million, its second print as a public company and a direct read on whether anyone is buying accelerators outside the Nvidia stack. Cisco reports with the focus on AI infrastructure orders and margins. Of the three, Coherent carries the most information per dollar of market capitalisation, because optics volumes lead rack deployments in a way that networking revenue recognised over long contracts does not.

Corporate Headlines Worth the Time

Teledyne Technologies agreed to acquire Varex Imaging for $1.1 billion, announced yesterday, consolidating the imaging component supply chain. OpenAI acquired the presentation startup NextSlide on Monday, a small deal that continues the pattern of model developers buying their way into application surfaces rather than waiting for an ecosystem to form around them.

Hyliion is up about 29% after receiving a $41.7 million US Navy contract for multi-megawatt KARNO power modules. That is another week in which a distributed power generation name has produced a larger percentage move than the semiconductor names the power is being built to serve, and it remains the most under-owned expression of the buildout. Trimble added 2.2% on second quarter results and Owlet rose about 10% on earnings.

Key Events Today

• 8:30am: July CPI, released at +0.1% month on month and 3.4% year on year, core +0.2% and 2.5%, all in line
• 10:30am: EIA weekly crude inventories, into a fifth consecutive session of gains in Brent
• 1:00pm: Treasury’s scheduled 10-year note auction, following yesterday’s 3-year. Worth watching after a post-CPI rally in the front end
• After the close: Coherent fiscal Q4, Cerebras Q2, Cisco fiscal Q4
• Tomorrow 8:30am: July PPI and weekly jobless claims. PPI is the pass-through check today’s CPI could not provide, because it captures the producer side of the energy move
• September 11: August CPI, the last inflation print before the meeting
• September 15-16: FOMC, now priced near 42% for a hike

What We Are Actually Watching

Three threads.

The first is that the market has repriced September on a stale energy input. Today’s release measured a month in which energy fell 1.5% and gasoline fell 2.9%. Since that month closed, Brent has risen five consecutive sessions to $89.53, ten vessels crossed Hormuz on Monday, and a second shipping lane at Bab al-Mandeb is taking fire. Tomorrow’s PPI is the first look at whether the producer side has begun absorbing that, and it matters more than a normal PPI because today’s consumer print structurally could not answer the question. Hike odds at 42% are a reasonable read of the data we have and a poor read of the data we are about to get.

The second is that the constraint on the AI cycle has completed its move from demand to capital, and both sides of that trade printed overnight. On demand there is no argument left worth having: Super Micro at $65 to $72 billion against a $54 billion consensus, CoreWeave adding $25 billion of commitments in three weeks, Nebius at plus 454%, Samsung and SK Hynix both up more than 6%. On capital the evidence is equally clear and pointing the other way: negative $6.8 billion of operating cash flow at Super Micro, $640 million of quarterly interest at CoreWeave against $2.58 billion of revenue, capex raised to as much as $39 billion. Both are true. The tape has decided to price the first and defer the second, and that is a defensible stance for as long as credit stays open. The tell is not the order book. It is the interest line, and it is compounding.

The third is that gold at $4,493 is up 1.17% on a morning when hike odds fell ten points and equities rallied. Gold rallying with a softer rate path is ordinary. Gold making a new high in the same week it also rallied alongside rising hike odds is not. Something in the metal is pricing a risk that neither the front end nor the VIX at 15.03 is currently expressing, and given what is happening at Hormuz and Bab al-Mandeb, the most likely candidate is the one on the shipping lanes.

Yesterday this note said the AI cycle’s binding constraint had become capital rather than demand, and that Super Micro would either answer the funding question or defer it. It deferred it, and the market rewarded the deferral because the demand number was too large to argue with. That is a fair outcome and we will not pretend otherwise. The part of the call that stands is the instrument to watch, which was never the size of the backlog and is now visible on CoreWeave’s income statement at 25% of revenue.

Marks above are pre-market and will move by the open. We will mark today’s calls against tomorrow’s PPI.