i had the following read to send last week, but i never got around to it. bummer! i certainly couldn’t have predicted what transpired this week, but i think i nailed the “waiting for a sudden correction” and “buckle up for the comings weeks” part:
markets need to be told what to do, and right now they are sitting in the frog-boiling-pot treading water. they do not know how much hotter the kettle will get, or whether they are already being cooked. or maybe they’re not being cooked at all and are in fact enjoying a nice spa, funded by record earnings??
(China is already cooked, though)
investors are still buying, passively and/or strategically, but they’re (apparently) frowning while doing so. buying is happening, but investors are not at all euphoric.
markets are currently mad that they have to pay for years-in-advance payoffs while visibility into the future currently maxes out at about a month (or less), and the companies taking part in the AI buildout have plans that need to near-perfectly execute well into the 2030s.
which means earnings beats get sold due to uncertainty about future uncertainty, among other things, rather than celebrated at face value. and forward multiples have compressed over time via earnings growth even as indices make highs. it’s a quiet, silent selloff, of sorts…
credit is also forcing a repricing of equities, with private marks moving first: OpenAI's latest raise cleared only after the target was cut to $1.25 trillion, and Anthropic's valuation talk has compressed from $2 trillion toward $1.5 trillion, with other issuers holding their own pricing until Anthropic prints.
nearly $500 billion of AI debt has been issued this year alone according to Goldman, and hyperscaler credit protection keeps printing records. the capex story transmogrified over time from a positive funding story to a negative credit story.
horizon compression hits multiples until something gives, & the candidates to give it are plentiful: the Anthropic IPO, the Fed, Iran, Ukraine, oil & diesel, the midterms, capex & the debt funding it, France, {insert one of many AI risks here}. one or more catalysts will have to send a clear signal to the market which direction it should head next.
in our previous W39 issue (September 28), we laid out our base case as up then down, or down then up. in other words: not flat:
"we'll keep [cash] on the sidelines until we get either a sudden correction, or an unwarranted rally and post-rally correction. in other words, flatlining from now until midterms/EOY is not our base case"
since then, the tape ran to highs into mid-October and this week delivered a solid drop. the psych/uncertainty/reevaluation dip is real and happening (in our opinion).
buckle up for the next ~2-3 weeks!
now, here’s what we have to say for this most recent week. and hopefully we’ll have a regular cadence moving forward.
a friend recently asked for our thoughts on markets. we said this:
good earnings are getting sold (they’re priced for extreme expectations & long future but nobody has visibility into next month, let alone 2030+), capex is relatively high + increasingly debt-funded + circular (eg. $ORCL ( ▲ 5.85% ) / $CRWV ( ▲ 7.16% ) borrowing to build for their own investors — their credit yield is blowing up bc confidence is shaken), efficiency gains hurt some parts of tech stack while helping others, inflation persistent so hikes coming but who knows when (always next meeting, never this one), Warsh watching capex's second derivative while giving no forward guidance, AI not paying off (enough?), AI paying off too much (hackers/etc), software showing AI selloff was stupid (rekt from fear then un-rekt on growth and outperforming again recently), bonds up to record levels => stocks vs a 5%-paying safe asset, gold down in a war year, "horizon compression" (valuation multiples compression bc less than usual visibility when capex/AI wants visibility into next decade), everyone long so no cash + no washout, 10 stocks = the entire index so money/ants just moving within index from one stock/sugar cube to next, no analog => price discovery is vibes, AI sycophancy + outsourced analysis certainly factoring into things but idk how, ...
basically, nobody knows what to think because plenty of data exists that supports multiple conflicting viewpoints, visibility is cloudy, & there's an unprecedented tech revolution running through everything (while the talking heads on both sides of the pro-/anti-AI argument spew the dumbest nonsense, leaving the sensible middle-ground neglected.)
a day or so later, we read the following about worry, which carries a similar message but is communicated differently/better…
QUICK THOUGHTS
OUR WALL OF WORRY | RUSSYARROW
you should read the above-hyperlinked Our Wall of Worry for yourself. it’s good.
but basically, in our own words:
imagine everyone spent the entire railroad & dotcom booms braced for the bubble.
that’s sort of what’s happening now. we’re living during a post-Internet, peak mental health crisis era, where every marginal bad thing in any corner of the globe is available (and all but forced on people via their addicting phones) 24/7.
so, we’re wondering, that perhaps this time around the widespread ambient anxiety keeps a lid on the euphoria and prevents an outright pop?
though, of course, that doesn't rule out long, orderly drawdowns.
midterms may help mitigate some anxiety. but it also could just take until the 2028 presidential election until we get a societal dose of anxiety medication. or at some point prices could bottom enough that they're seen as a deal, even in an uncertainty-riddled market.
and we're not saying the next president should be from one party or the other, just that whoever it will be will undoubtedly be less of a loose cannon with no predictable trajectory.
Sherwood ( $HOOD ( ▲ 2.2% )’s media arm) said there was the biggest retail dip buying in GOOGL on Friday, by a lot. interesting.
as oil blows away tech on YTD/1-year timeframe in year of our lord 2026, the year of anti-technology & pro-fossil fuels.
someone shared a chart showing just how much of the future can be baked into prices. we don't think this is necessarily true of AI, but just something to keep in mind.
stock valuations are a chaotic, inconsistently-defined mixture of past, present, future, and the future part is getting heavily discounted as earnings fail to exceed extreme expectations + visibility into the future sucks.
tech swapped places with oil, slogging along with some sort of albatross burden around its neck the industry feels it doesn't deserve.
as long as tech continues to spend lots of its undeserved cash on public-benefiting infrastructure (whether at the expense of share prices or not), and as long as AI continues to play close to 0% role in creating some of the best art/music/games we've seen in years (despite claiming it "solved" art multiple times already), the future of the humans not holed up in a death cult in SF will be better off in a few years. (🤞🤞)
PORTFOLIO NEWS
10/13: Infleqtion won a £9 million Innovate UK award to develop a deployable quantum RF direction finding system.
10/30: Infleqtion ran its Tiqker optical atomic clock continuously for two weeks aboard the Navy support vessel RV Merlin during the Maritime Big Play Pacific & BARB-26 exercises, testing GPS-independent timing at sea.
10/13: United Therapeutics is presenting new CHEST 2026 data across its ralinepag, treprostinil & PH-ILD studies.
10/13: United Therapeutics reached a global settlement with Liquidia. Yutrepia stays on the market for PAH, Liquidia drops the PH-ILD indication & pays a net $380.7M across 2026-2027.
10/19: the FDA cleared the IND to proceed with SUMMIT, a phase 2, 16-week, double-blind trial of treprostinil SMI in about 40 patients with PH-COPD, with exercise capacity & NT-proBNP as secondary endpoints. a phase 3 registration study is anticipated in 2028 if SUMMIT succeeds.
10/20: United Therapeutics opened its third designated pathogen-free xenograft production facility, in Houston, built to manufacture xenokidneys & xenohearts.
10/22: United Therapeutics' board authorized a new share repurchase program for up to $2 billion of common stock, available through October 21, 2027. the ongoing September 2026 accelerated share repurchase runs to Q4 2026 & does not reduce the new authorization.
10/15: ASP Isotopes' Quantum Leap Energy signed a binding heads of agreement with Necsa to form a joint venture for HALEU production at Pelindaba. QLE holds about 80% & Necsa about 20%, with TerraPower offtake agreements supporting the venture.
10/15: Redwire won about $13.8M in additional purchase orders to deliver Stalker UAS to the U.S. National Guard, where the aircraft will train soldiers for the Army's new 15X Tactical UAS Specialist specialty.
10/21: Redwire signed an MOU with EnduroSat to combine EnduroSat's high-volume spacecraft manufacturing with Redwire's power systems & prime-contractor experience for European government, defence & commercial missions. the named targets are VLEO defence operations, EU-based orbital data centers & next-generation PNT constellations. no value disclosed.
10/14: Rocket Lab moved Neutron's first launch into 2027 after inspections found voids in the carbon-composite forward propellant dome on the first stage. a replacement dome is built, & full first-stage assembly & testing in Q1 2027 gates a new launch date.
10/27: Bryan Johnson visited Ginkgo Bioworks (and did some other, unrelated stuff during a 10-day trip).
THE FAYE WEBSITE
we’re working on a homepage with some stuff that we find useful, and perhaps others may find it useful as well.
it currently has three pages (four if you count this newsletter), all works in progress.
the dashboard tracks the portfolio, watchlist, indices, & some relevant sector ETFs. it also includes the portfolio & watchlist news (updated daily)
the daily news scan is categorized news, generated daily from a hand-picked set of feeds
consensus is an experiment that we may or may not continue to explore. it aims to track one thesis against a changing landscape of data, tracking a “narrative” as it ebbs, flows, or changes course. we’re testing this out with the Strait of Hormuz closure. for the Hormuz case, for example, it aggregates sources and ship data and attempts to retroactively reconstruct the implicit (deals, routes, etc) then explicit (public statements) shift from “we’ll wait for Hormuz to open again soon” to “we are actively re-routing as best as we can around Hormuz.” in the image below, we track shipping company $FRO ( ▲ 0.71% ) against that “consensus.”
CLOSING
for this issue’s song, a new single from Cloud Nothings’ forthcoming album:
see you next time.
AURUM NOSTRUM NON EST AURUM VULGI 🪱
THE REST OF THE NEWS
🌐 software
Ai2's open Molmo 2 release let one MIT researcher fine-tune a salmon counter for underwater sonar video that also takes corrections in plain language.
Ai2's HiRO-ACEv2 climate emulator matches the reference distributions of precipitation & near-surface winds out to the 99.9999th percentile at over 300 times less compute than the numerical model it emulates.
OpenAI donated its Open Responses spec for a common LLM API to the Linux Foundation's Agentic AI Foundation, & AWS, Databricks, Hugging Face, Nvidia & vLLM already implement it while Anthropic & Google keep their own APIs.
Quantinuum says its hardware now scales quantum error correction well beyond breakeven, with each step up in logical qubit size improving some measures by more than tenfold.
Character.AI filed for bankruptcy & is selling some of its assets to Disney after mounting scrutiny & lawsuits over chatbot safety.
Ukrainian drones reportedly struck a Yandex data center in Vladimir Oblast alongside warehouses & targets across the Moscow & Rostov regions.
🤖 hardware
ASML posted a record quarter with $13.06B in revenue & about $5.79B in profit & said demand is expected to outstrip its production capacity in 2027 & 2028 despite planned expansions.
three shut-down US nuclear reactors are being restarted with government backing to supply a combined 2.25 GW to AI data centers, with Microsoft & Google among the backers.
two teams at TU Wien & Tsinghua built the first operational nuclear clocks, tuning ultraviolet lasers to a thorium-229 transition in calcium fluoride crystals, in papers published in Nature.
Google's TPUs are serving AI workloads in production inside Meta's data centers, the first sale of the chips to an external customer, running PyTorch through new open-source engines.
TSMC is reportedly asking equipment suppliers for machinery without Chinese rare-earth magnets, seeking alternative motors as export controls threaten fab operations.
🧬 biotech
Treasury proposed adding biotechnology to the COINS Act outbound investment restrictions, barring US equity, joint venture & greenfield deals with biotech companies in China & other countries of concern while leaving licensing deals outside the ban, with public comments due December 7, 2026.
NIH awarded R01-equivalent grants to 1,648 early-stage investigators in FY2026, the most ever recorded, & launched Generation Discovery to recruit 100 early-career PIs into its own labs over the next three years.
ARPA-H launched SURPASS, a program funding continuous adaptive platform trials with digital-twin trial simulation, real-time analysis & automated trial operations, with solution summaries due November 30, 2026.
the federal push to speed up clinical trials is having a moment, spanning Operation TrialBlazer & FDA draft guidance for single pivotal trials, with staffing named as the binding constraint.
Deleon's Exploreon picks the next metabolism experiment for each person based on where its model is still uncertain, & in a simulated test its datasets trained a predictor to the same accuracy as frontier-LLM or random sampling with 7 to 12 times less data.
placebo responses in acute migraine trials kept rising over time in a meta-analysis of 126 trials & 24,614 placebo patients, with publication year still tracking a larger response after adjustment & the strongest responses on intranasal & subcutaneous routes.
an umbrella review of 1,691 mental-disorder trials found placebo effects vary widely by disorder & track later publication year, more trial sites & larger samples.
an Ion Genomics podcast episode with Andrew Adey walks through sciMET single-cell methylation & frames aging as loss of cell identity.
researchers built recordanelles, synthetic organelles that capture & protect up to 90% of a human cell's endogenous mRNAs for days, so later sequencing reads back the cell's transcriptional history at single-cell resolution.
Danaher & Nvidia are collaborating on autonomous science, pairing lab instrumentation & automation with accelerated computing & AI as Danaher plans its first AI-powered autonomous lab.
🏗️ infrastructure
the DOE's Quantum Genesis Q Competition puts up to $215M in milestone prizes behind the first fault-tolerant quantum computers at 100 or more logical qubits, with applications due October 19, 2026.
Pasadena startup Oratomic raised $775M to build a fault-tolerant quantum computer on neutral atoms, arguing 10,000 to 20,000 qubits will suffice.
NTT Data Group is reportedly finalizing a $6.3B data center in Osaka Prefecture for Anthropic, at up to 500MW with partial operations in 2028.
a Russian strike critically damaged GigaCenter's Tier III data center in Kyiv on October 20, while GigaCloud services continued from backup sites in Ukraine & the EU.
Poland's PEJ commissioned Westinghouse to begin long-lead item procurement for the first AP1000 unit at Lubiatowo-Kopalino, with first power targeted for 2036.
AEP plans a $4B, 702MW Bloom Energy fuel cell plant in Cheyenne, Wyoming whose output goes to Google under a 20-year agreement, plus up to 1.6GW of Mainspring generators through 2034.
💰 finance
September producer prices rose 6.3% year over year, the worst reading since December 2022, with energy up 35.6% & core producer prices up 5.0%.
the 20-year Treasury auctioned at 5.469%, the highest yield for the tenor since its 2020 reintroduction, on a $13B sale with a 0.9 basis point tail.
the US closed fiscal 2026 with a $1.992T deficit & record gross interest of $1.36T, with net interest over $1T for the first time.
SpaceX's $40B debt raise is pricing at sharply higher rates than its last bond tap, with the lowest-rated tranche expected near 8.3% as AI debt markets pull back.
OpenAI is working on raising up to $30B at a $1.25T pre-money valuation, led by Coatue & UAE investors, after filing confidential IPO paperwork in June.
Broadcom CEO Hock Tan warned that many AI investors behave like gamblers & said insufficient capital could become the industry's next constraint.
🏛️ society
a California court dismissed the challenge to warrantless searches of San Jose's license plate reader database, a day after an Oklahoma federal court called a warrantless Flock search a Fourth Amendment violation.
55% of Americans expect Democrats to win the House in the midterms while the Senate splits nearly evenly, in a Pew survey of 5,062 adults from September 28 to October 4.
44% of US adults had trouble paying for at least one basic necessity in the past year, including 71% of lower-income adults, & 54% could not save.
a congressional report found Tinder had not updated most of its scam-detection models in years, while romance fraud costs Americans at least $1.3B a year.
Matt Yglesias tallies a long slide in Americans' offline social life, with entertaining at home down from 88% to 67% since 1995 & club meetings from 45% to 26% while internet use went from 8% to 98%.
⏳ perspectives
Maggie Appleton's essay on the dark forest & the cozy web maps how the open social web drove people into private, sheltered corners of the internet.
brokers are selling dead startups' code & workspace data to AI labs, & Google outbid Mercor with $10M for Spirit Airlines' bankruptcy data, 100M emails & 500M Teams messages included.
researchers left copies of Claude alone on a virtual island for 30 hours & the agents invented games, set a juggling record & then voided it for stricter rules.
an OpenAI proof of the quasi-Riemann hypothesis has mathematicians calling it the most significant AI-for-math achievement so far, with one version formally verified in Lean.
🎨 art
Kali Malone's Baker's Dozen runs from Renaissance composition to grunge ahead of her new album Burning Song, out October 30 on Ideologic Organ.
Miyazaki's unmade adaptation of Richard Corben's Rowlf, refused by Corben in the early 1980s, was reworked into the princess who became Nausicaä.
Rudolf Kalvach designed 21 postcards for the Wiener Werkstätte from 1907, grotesque monsters in primary colors on black satirizing greeting-card sentiment.
decomp.dev, the game decompilation progress database, is shutting down, saying AI-based projects & bad actors broke the community aspect of the work.
Art Basel Paris will close Friday evening & cancel its Saturday & Sunday public days amid student protests in France, with anti-ram barriers around the Grand Palais.
