1 Stock to Buy Now as Yields Hit 5%

Morning Watchlist: Thursday Edition             

A quick note from Behind the Markets

It's Thursday. The bond market comes back from its Veterans Day holiday this morning — and walks straight into a 30-year auction.

While it was out, the most doubted company in the AI trade opened its books and showed the crowd a receipt. We have an old position riding on that one, so we'll start there.

A monster quarter from the stock we told you to sell. A bond market getting paid to argue. And the quiet giant of the internet, graded after tonight's close. Three stories this morning. Three pairings.

Let's get into it.

1) The Receipt and the Refinancing

On Tuesday night, CoreWeave — the AI cloud company that rents out Nvidia chips by the hour — reported the quarter the bulls had been promising. Revenue of $3.66 billion, up 168%. A backlog of contracted business that grew to roughly $133 billion. In Wednesday's early trading, the stock jumped about 15%, toward $56.

A housekeeping note, because we have skin in this story. On October 16th we told holders to sell CoreWeave at $65.78. Our exact thesis: sell the funding model, not the demand. The demand was never our worry — the worry was $47 billion of debt, with unsecured bonds yielding 15% in the open market.

Tuesday's report answered half of us. Demand: confirmed, loudly. The funding model? Interest expense hit $846 million for the quarter — nearly triple a year ago — against a net loss that widened to $709 million. Next quarter, management says the interest bill tops a billion. Profitability is penciled in for the first half of 2028.

Here's the genuinely new part. The CEO said CoreWeave is done with unsecured public debt; from now on it borrows against its customer contracts, and the CFO says the next loan should cost 7% to 7.5% instead of 15%. Picture a developer building towers on a credit card — who just qualified for a loan backed by the signed leases, at half the rate. That's real progress. It's also still a loan application, not a loan. Stifel kept its Hold rating Wednesday and cut its price target from $120 to $60 — on the good news. And short seller Jim Chanos spent the morning reminding everyone the business earns a 2–3% pre-tax return on all that borrowed capital. Sell stands for holders — even after the pop, the stock sits about 15% below where we flagged it. Show us the cheap loan actually signed and the interest bill cresting, and we'll revisit in print.

But notice what nobody disputes anymore: the money is getting spent. CoreWeave's capital spending last quarter alone was $14.5 billion. Somebody cashes those checks on delivery, whoever ends up owning the towers.

The pairing: Dell Technologies (DELL) — Watch

Dell is the lumberyard in this construction boom — CoreWeave and SpaceX are two of its biggest AI customers, and the lumberyard gets paid when the trucks load, not when the towers fill up. Last quarter Dell booked a record $60.9 billion in AI server orders and ended with a $95 billion backlog. Full-year guidance: $192 billion in revenue, up 47%.

And the stock has crashed. After the midterms, the crowd decided a Democratic Congress and a new governor in Texas would slow data-center construction, and Dell fell by more than a third in a month — from a $596 high to around $335. That's roughly 13 times this year's guided earnings. The S&P 500: 21 times.

So why Watch and not Buy? Cash. Last quarter Dell reported $4.1 billion of net income but squeezed out under $1 billion of free cash flow — the profits are on paper while the cash waits in receivables and parts bins, and memory prices are rising against those thin AI margins. Dell reports in late November. If the backlog starts turning into cash, this one moves up our list in a hurry. If customers like CoreWeave can't close their cheap loans, the lumberyard's order book is the first place it shows.

2) Welcome Back to the Five Percent World

While the AI crowd argued, the Treasury market quietly repriced the cost of money. After Tuesday's hot CPI, the two-year yield jumped 17 basis points to 4.74% and the ten-year hit 4.99% — a rounding error from a number with a 5 in front, something an entire generation of investors has never traded against. Tuesday's ten-year auction drew the weakest demand since early June. Dallas Fed President Lorie Logan called for at least two more hikes. The bond market reopens this morning and faces a 30-year auction this afternoon.

We can't tell you where the argument between the Fed and the bond market ends. We'd rather get paid while they argue.

The pairing: Tradeweb Markets (TW) — Buy

Tradeweb runs the electronic marketplace where bonds and rate derivatives change hands. It's the court stenographer in a long trial: paid by the page, no matter which side wins. And October's transcript was enormous — average daily volume of $3.6 trillion, up 26.3% from a year ago, with Treasury volume up 32.6% and rates derivatives up 48.9%. The whole courthouse is busy: CME's rate volumes rose 28%, ICE's 40%.

We flagged this one on September 6th at $106, when a hike was merely back on the table. Here's what changed: the hike is now fully priced for December 8–9, two more are priced by June, and every month of the cycle has printed new volume records. The stock, near $128, is up about 21% since that call — at roughly 25 times next year's expected earnings, a premium to the market we don't usually pay. We'll pay it for a toll booth whose traffic grows 26% a year. The honest risks: growth keeps tilting toward lower-fee products, so volume records don't fully become revenue records, and if the Fed settles the argument early, the courtroom empties.

3) The Plumber Gets Graded Tonight

Tonight after the close, Cisco reports earnings. Nobody photographs the pipes in a mansion, but every room needs them — and Cisco sells the networking pipes of the AI build-out. Its AI infrastructure orders hit $9.3 billion last fiscal year, about 4.5 times the year before, and networking orders grew 40% last quarter. The CEO calls it a networking "super cycle."

The crowd agrees — maybe too much. The stock jumped 5% on Monday to about $98, its best day since June, before a single number was published. The options market is pricing a move of about 8% in either direction tonight, and it's earned that respect: the last three reports moved the stock 8.4%, 13.4%, and 12.3%. Morgan Stanley downgraded the shares on November 5th, worried that AI gear carries lower margins — Cisco itself guided gross margins down a notch for exactly that reason.

The pairing: Cisco Systems (CSCO) — Watch

At about 19 times this year's guided earnings, with Wall Street's average target up at $135, Cisco is reasonably priced for a super cycle — but the setup into tonight is a coin flip with an 8% blast radius, and we don't flip coins the morning of the toss. A stumble over the margin bar tonight is our kind of entrance. If it clears the bar and runs, we'll applaud from the sidewalk; the pipes will still need laying next quarter. What kills the thesis entirely: AI orders stalling — a super cycle that stops superseding.

Before You Go

That's the watchlist. CoreWeave showed the receipt but still owes the interest — our Sell stands, while the lumberyard it shops at sits a third off its high. The bond market came back to a five percent world, and the stenographer is getting paid by the page. And the plumber gets graded tonight.

Busy day on the calendar: jobless claims this morning, the 30-year auction this afternoon, then Cisco and Applied Materials after the close — AMAT's report also grades the equipment aisle where our Lam Research and FormFactor positions sit. Friday morning brings October PPI, the last big inflation number before the Fed's December meeting.