S&P 500 futures are modestly higher with Nasdaq 100 futures trading to the slightly negative ahead of the open, as investors seemingly continue to trim tech risk while not hitting the panic button on the broader market.
The Nasdaq 100 finished virtually flat on Thursday despite another 1% loss for semiconductor stocks after media reports pointed to underwhelming sales growth from Anthropic ahead of a potential IPO. And the S&P 500 managed to bounce back from its first 1% loss since July with a solid gain.
Robinhood traders’ buying activity has remained resilient despite the recent tech-centric volatility, with five-session net purchases running at 80% of peak levels reached in September.
As a subsidiary of Robinhood, Sherwood Media is restricted from writing about any company in which Robinhood is or was a selling group member of the IPO during the regulatory "quiet period" for that company.
It’s all fun and games until…
It’s been a very bad week for some high-profile companies that rely on the AI boom being in the early to middle innings rather than its late stages.
(At the risk of hyperventilating over the recent shellacking of some of the more speculative companies tethered to AI, let’s get it out of the way that the S&P 500 is still less than 1% below its record close.)
Despite hot CPI and PPI inflation prints, 10-year Treasury yields are down more than 10 basis points this week. The outlook for highly-leveraged and/or cash-burning companies to accelerate spending has been challenged in both public and private markets. For the former, see widening CoreWeave spreads, and for the latter, Anthropic revenue figures that were not as impressive as hoped.
Putting together the message from the bond market and the stock market, the cross-asset snapshot takeaway seems to be that investors think right tail economic and inflation outcomes require strength from the marginal players in the AI ecosystem — that is, the companies with balance sheets less robust than the hyperscalers. And that such strength is not likely to be in the cards with interest rates at these levels.
The price action this week also vindicates what BTIG’s Jonathan Krinsky had been saying about the near-term environment: that a break in the upward trend in rates would also likely coincide with a break in other trends, like tech outperformance. It also helps support the longer-term view from Bank of America’s equity derivatives strategists that any eventual play on a “bust” would also be a rates-down move. From an Oct 13 note from BofA’s team led by Arjun Goyal:
“While the Nasdaq remains resilient and within 2% of all-time highs, its 8-Oct ~2% intraday selloff triggered by news of lower-than-expected OpenAI revenue offered a glimpse of how the equity market might react in a more consequential AI slowdown event. For one, the Nasdaq's stark underperformance vs the S&P pointed to its higher beta to the private-side AI ecosystem, another reason we see it as the preferred index for AI-related trades. Moreover, the concurrent move lower in rates despite the recent equities lower / yields higher regime was reminiscent of Jan-25's DeepSeek event and the early '00s Dotcom bubble unwind. In this context, if the eventual unwind of the AI bubble plays out in an equity down, rates down fashion, we believe hybrid structures can offer an attractive way to hedge this joint risk.”
For now, it’s all fun and games noise until we see lower highs and lower lows confirmed across the AI trade. And it’s here where we see some dispersion depending on your role in the boom.
On the one hand, SMH hasn’t yet come too close to undercutting its late July low, and that’s exactly where CoreWeave bounced. One the other hand, for AI-affiliated industrials like Caterpillar, Q4 has already brought lower prices than Q3:
We believe credit markets are pricing a financing story while ignoring the demand story underneath it,” writes Dan Ives, managing director at Yorkville Ives & Co. “Our view would change on demand, not rates: a capex guide-down from the hyperscalers, cancellations or renegotiations of contracted capacity at CoreWeave or its peers, or a break lower in GPU rental pricing. We see none of those signals today, and until we do, we view this drawdown as a golden buying opportunity.”
(BTIG’s Krinsky, for his part, now also sees a setup for a “tactical bounce” in semis at these levels.)
Broad equity market fear is still in absentia. On Wednesday, we remarked how the prior three sessions had been the lowest dollar volume for SPY so far this year. While that’s since perked up, both Wednesday and Thursday’s traded value were below the 2026 average. And even with the pain centered in tech, QQQ dollar volumes have only been a touch above this year’s mean over the last two trading days.
If anything, traders looking for protection in the event of a vol spike was a leading (rather than coincidental) indicator around the market’s recent spot of bother.
The five-session put/call ratio for the VIX Index hit multi-year lows on October 8, just a couple sessions removed from the S&P 500’s record close.
Infleqtion point?
The cumulative market capitalization for IonQ, D-Wave Quantum, and Rigetti Computing is virtually unchanged from where it was in early September 2025, right before those companies ramped in part on speculation over US government support.
The biggest news for the industry so far in 2026 has been the confirmation of that government backing, with US deals that provided grants in exchange for equity stakes to nine quantum computing companies announced in late May.
As we noted in one of our initial editions of this newsletter, investing in Intel has really been the only “follow the Feds” tactic that’s paid dividends, and quantum has been no exception. Most pure-play firms are trading not too far off 52 week lows.
The fundamentals of the industry at large really haven’t meaningfully improved over the past year, nor have they deteriorated. And quantum computing is not a space where most traders were looking for hockey-stick growth now, it’s more about the prospect for technological breakthroughs that have the potential to spur parabolic operational improvements further down the road.
One of the companies poised to receive a grant from the Department of Commerce is Infleqtion, a quantum sensing and computing company that utilizes the neutral atom modality.
I spoke with CEO Matthew Kinsella on Thursday as his stock snapped a 13-session losing streak to get his views on why investors have soured on the quantum industry and what this technology may bring to the table that artificial intelligence cannot.
The quantum industry’s market malaise
Kinsella, a former venture capitalist, offered his take on why stocks in the industry have faced such severe selling pressure:
“I was surprised this didn't happen earlier, honestly, when rates started to move, especially the longer rates. Because that is always inversely correlated to the valuation multiple for long-dated assets, right? I mean, the move was unprecedented, right? 4% to 5.2% for the 10-year or whatever it was? That will often have a depressing effect on, on assets that are not cash flow generative and most of their value is in the terminal value. So I think 90% of the movement of quantum stocks is due to that, maybe 80%.
Then the other two 10%s are probably 10% due to some concerns on the ripple effect of higher rates to some of the more long-dated chip-like companies or AI companies like CoreWeave and Astera Labs and those guys. We tend to be correlated with them even though the businesses are completely uncorrelated. But for some reason, the stocks seem to be correlated.
And then I think unfortunately the added kicker is IonQ issuing a billion dollars of stock to acquire a company and then $2 billion of stock to raise capital…I'm not faulting IonQ for doing anything. You go ahead, they do what they gotta do. But I think it probably logically had a ripple effect on the rest of the quantum companies because they're the largest, right?”
He added that he’d be “very nervous” if Infleqtion needed to raise capital soon in this environment, calling it a “scary proposition” which “luckily we do not need to do.”
I have a lot of sympathy for the rates-based arguments, and even more for the idea that companies trade in baskets based primarily on commonalities in how their stocks behave (which then increases their tendency to behave similarly).
But the key underlying factor may be that the speculative energy just is not there anymore for this part of the market.
Major pure-play quantum computing companies that have been around for a few years (like IonQ, D-Wave, and Rigetti) have seen call volumes drop precipitously from their 2025 peaks. While there are some nascent signs of potential risk-defined falling-knife-catching in some of these names via options lately, it’s nothing to write home about yet.
And secondaries from IonQ are far from the only quantum supply that markets have needed to digest this year. Infleqtion itself went public this year via a SPAC, as did peers IQM Quantum Computers , Pasqal Holding, and Xanadu Quantum, while Quantinuum also had its IPO.
What quantum may do that AI can’t
AI has, from a market perspective, likely sucked some of the speculative oxygen from quantum computing — or, at least, directed it toward different themes.
For instance, we’ve recently discussed how biotech, and genomics specifically, seem to have caught a bid based on the potential for AI to enhance or expedite breakthroughs.
Interestingly, quantum computing firms have also argued that their technology will be foundational to leaps in drug discovery, and can do things that AI can’t. We’re in a world where everyone’s talking about compute but far, far fewer people are talking about quantum compute. Making and, eventually achieving — these kinds of value propositions may be integral to reigniting interest in quantum stocks.
Kinsella on what quantum does to improve drug discovery that AI can’t:
“ Even the most powerful AI cluster is still boiling things down to zeros and ones. It's digital in nature, and so anything it's doing is making approximations. It’s getting sort of close enough to the real answer, and you can use that to help the drug discovery process. But if you actually want to model how atoms come together to create molecules and how those molecules will be used in different forms that is a quantum mechanical process, and those are the types of problems that classical computers will just literally never be able to do because you'd have to simulate every single possible combination of how these electrons might come together, and that would require a computer the size of the planet Jupiter with so many zeros and ones flipping. And so yes, absolutely, AI is accelerating drug discovery in certain ways, but it's still sort of like a brute force approximation way. Whereas quantum will actually be able to model out these molecules being formed in the way that they're formed in nature, and so that will be, that will be the true accelerant for drug discovery. And so we keep pushing the limits on what we can do with AI, but they are still approximations.”
Meanwhile, AI has already accelerated improvements in Infleqtion’s tech stack, with the firm using ChatGPT Sol 5 and 6 to discover a way to “considerably” bring down the load on its physical system and improve error correction efficiency, per Kinsella.
Rule Quantannia
This week, Infleqtion announced a $12 million contract from government-backed funding agency Innovate UK to continue developing a quantum radio frequency direction finding system.
Kinsella flagged that the UK has “announced some big, big, big dollars that are gonna go into quantum” with recipients likely being revealed before year-end as something to keep an eye out for.
He highlighted two reasons why the UK punches above its weight in the quantum industry:
The work of Sir Peter Knight, whose research has spurred not only the UK’s quantum ambitions but also Kinsella’s own initial interest in quantum sensing, as well
The desire to lead at least one frontier in technology, since quantum computing is currently on more of a level playing field than AI.
Seen on Socials
From @VKMacro on X:
What to watch
Monday:
Cleveland-Cliffs results due out ahead of the open.
Tuesday:
GE Aerospace, RTX, Hasbro, and GM results due out premarket.
SpaceX slated to release quarterly results after the close.
Wednesday:
Meta, Tesla, IBM, and Southwest Airlines results due out after the close.
