📈 Meta just gave the market the one thing it was missing

Good Morning.

The through-line today is the price of ambition: who is paying it, who is passing it on, and who just found a way to get paid on the other side.

Meta turned its AI spending problem into a cloud revenue pitch, chip stocks gave back some of their historic Q2 run, ADP’s June number came in soft, and the USMCA’s non-renewal just added another layer of trade fog over an auto industry already sorting winners from losers by powertrain.

A lot to work through this morning.

1. The Lead · Tech

Meta Turns Its AI Spending Problem Into a Cloud Revenue Play

Meta (META) closed up nearly 9% on Wednesday after Bloomberg reported the company is building a cloud business to sell excess computing capacity to outside customers, confirmed by CNBC’s Jim Cramer. The company is debating whether to offer access to hosted AI models or raw compute power, according to Bloomberg. Meta told investors in April it plans to spend as much as $145 billion on capex this year, and the cloud pivot is being read as a way to recoup some of that enormous outlay. The move follows the playbook of Elon Musk’s SpaceX, which has already inked deals with Anthropic at $1.25 billion per month and Google at $920 million per month for excess capacity. The announcement sent neocloud names CoreWeave and Nebius Group each plunging roughly 12% as investors braced for a formidable new competitor, according to CNBC.

$145 billion: Meta’s planned 2026 capital expenditure budget, the spending pile the new cloud business is designed to help justify, per the company’s April investor communication.

The Bull & The Bear

• ▲ Bull: Meta has already spent the money. Monetizing idle capacity is pure margin on infrastructure that exists. If the company can attract enterprise customers at the scale SpaceX has with Anthropic and Google, this business could meaningfully offset capex concerns and reprice META as a cloud infrastructure play, not just a social media company.

• ▼ Bear: Meta is walking into the most competitive market in tech, going up against Amazon, Microsoft, and Google on their home turf. The company’s first AI model under Alexandr Wang, Muse Spark, was positioned as a ‘foundation’ rather than a state-of-the-art offering, which is not the profile of a cloud provider that commands premium pricing. Excess capacity today can become a stranded asset tomorrow if AI demand normalizes.

The Bull Street Take

I like this move more than the market’s one-day pop suggests. The knock on Meta’s AI spending has always been that it was burning cash with unclear returns. A cloud business changes the unit economics of every dollar already deployed. The risk is execution in an unfamiliar market. But Zuckerberg has a track record of copying the playbook that works and scaling it. SpaceX showed this can be worth billions per month. Meta has more compute than almost anyone. Worth watching closely.

Markets in Review · The Tape

Chip Stocks Crack as AI Infrastructure Trade Faces Its First Real Test

Markets in Review

Wednesday’s session saw a sharp reversal in semiconductor names even as Meta (META) surged nearly 9%, creating a bifurcated tape where the hyperscalers held firm while the picks-and-shovels names took the hit.

The VanEck Semiconductor ETF (SMH) fell more than 5% on Wednesday, one day after closing out what CNBC described as the fund’s best quarter ever, a 71% gain from April through June. Micron (MU) led the carnage with an 11% drop that erased $138 billion in market cap. Intel (INTC) fell 9% and AMD fell 7%, per CNBC.

The catalyst was Meta’s reported move to sell excess compute capacity, which markets read as a signal that AI infrastructure supply may be closing in on demand. That is a meaningful shift in narrative for stocks that spent Q2 pricing in insatiable, indefinite demand for memory and processors.

On the other side of the ledger, Meta’s 9% gain reflected investor relief that the company’s enormous capex commitment may generate direct revenue. CoreWeave and Nebius Group each fell roughly 12% as the neocloud market priced in a powerful new entrant, per CNBC.

Go deeper

• Micron (MU) dropped 11% despite reporting more than a quadrupling of revenue last week with gross margins surging to 84.9% from 39% a year earlier, per CNBC, illustrating how quickly sentiment can overwhelm fundamentals in momentum-driven sectors.

• Semiconductor equipment names Lam Research (LRCX), KLA Corp. (KLAC), and Applied Materials (AMAT) all fell at least 10% on Wednesday after each had more than doubled in Q2, per CNBC, a textbook example of how violent reversals can be at the end of a historic run.

• Meta (META) was the session’s standout gainer at nearly +9%, with KeyBanc analysts writing that the cloud move positions Meta ‘more into the enterprise side of the market, which could provide more immediate’ ROI, per CNBC.

What they’re saying

“Earnings are accelerating, yet multiples are compressing. All I can attribute that to is hyperscalers have been valued as capital intensive and asset-heavy versus asset-light.” -- Richard Saperstein, CIO at Treasury Partners, on CNBC’s Closing Bell

2. Macro · Labor

ADP’s June Number Comes In Soft, Setting Up a Crucial Friday Payrolls Report

Private payrolls rose by 98,000 in June, according to ADP, below the Dow Jones consensus of 110,000 and down from an unrevised 122,000 in May. Nearly half the gains came from education and health services (48,000), while leisure and hospitality added a meager 2,000 jobs, a continuing soft signal for consumer demand, per CNBC. ADP’s chief economist Nela Richardson called it ‘a slowdown in job creation’ driven by both supply constraints and weaker demand. The Wall Street consensus for Friday’s BLS nonfarm payrolls report is 115,000, with the unemployment rate expected to hold at 4.3%.

3. Deals · Trade

USMCA Is Officially Not Renewed, Kicking Off Years of Renegotiation Risk for Autos

The Trump administration confirmed Wednesday it will not renew the USMCA trade pact in its current form, triggering annual reviews that could last until 2036 and reshaping the supply chains underpinning roughly $2 trillion in annual North American trade, according to CNBC. The auto industry, representing about 18% of U.S. trade with Canada and Mexico, faces the most acute exposure: the administration is reportedly pushing to raise regional value content requirements to 82% from the current 75%, with 50% of that value required to originate in the U.S., per CNBC. AlixPartners warns the cost to move certain parts from China into the U.S. could rise as much as 50%, and Boston Consulting Group cautions that standards set too high could paradoxically reduce U.S. production.

4. The Tape · Autos

Hybrids Are Winning the U.S. Auto Market as GM’s EV Bet Costs It Ground

Second-quarter U.S. auto sales revealed a widening split between automakers with strong hybrid lineups and those without. Toyota (TM) posted a 1.1% sales gain driven by a ~20% increase in electrified vehicles, Hyundai reported a 67% increase in hybrid sales for the first half, and Honda’s record electrified sales powered an 8.4% overall gain, per CNBC. GM (GM), which offers only one low-volume hybrid, reported a 4.2% quarterly sales decline, with EV sales off 33% year over year. Cox Automotive now warns Toyota could overtake GM as the top-selling automaker in the U.S. by year-end. Gas prices up more than 20% from a year ago, according to AAA, are the engine behind the hybrid surge.

+ Also on the Tape

• AI: Palantir (PLTR) CEO Alex Karp said on CNBC that AI models have been ‘completely, irresponsibly, oversold,’ claiming enterprise CEOs are privately ‘twice as livid’ about token costs and lack of ROI as he is publicly.

• Media: Comcast (CMCSA) named former CFO Michael Angelakis as incoming CEO of the cable and internet business as part of its planned tax-free spinoff of NBCUniversal and Sky into a separate publicly traded entity.

• Autos: Nissan was a surprise Q2 bright spot, posting a 9.6% sales gain despite limited electrified models, driven by a sales-focused turnaround plan, per CNBC.

• AI Infra: Neocloud companies CoreWeave and Nebius Group each fell roughly 12% after Meta’s cloud ambitions raised the specter of a massively capitalized new competitor entering their market.

Featured Contributor · Private Markets

There Are Four Seats at Every Deal. One of Them Wins No Matter What.

by Oren Klaff, click here the read the exclusive article for Bull Street

Every private equity deal is financial engineering, Oren Klaff argues in his third piece for Bull Street, and the question is never whether there’s a trick, because there always is. Continuation vehicles, preferred stacks, recap dividends, fee resets, fund-of-funds Russian dolls: every structure is built to move value from one seat at the table to another. What actually decides whether you win or lose is which of the four seats you occupy when the price gets set: the Banker, the Founder, the Professional Investor, or the Retail Buyer. One of those seats makes money on every deal regardless of whether the company wins or loses. That is the magician. Guess which seat gets the trick pulled on it.

His point for anyone allocating into private markets: you end up in the fourth seat by default. You see a deal already shopped to twenty funds and passed on, the deck looks great, you commit, and three years later it gets recapped, diluted, or sold to an affiliated buyer while the people running it make money either way. The fix is not smarter diligence or another article on the yield curve. It is changing seats: getting in before the professional investors, investing alongside management rather than the PE firm, and having direct access to the people writing the structure before it is handed to you as a done deal.

Oren’s Take

Be not the investor. Be the banker. It’s the line I put on the cover of every presentation I give, because the value in this industry is captured at the seat, not at the transaction. Every PE professional knows this, it’s the reason they went into PE in the first place. You can keep being the exit strategy for people you’ve never met, or you can get closer to the deal before it reaches you as love it or leave it.

→ On Thursday, July 16, Oren is running a live walk-through with the Bull Street community on exactly how the seat-change works, no slides, no course pitch. Reserve your spot: https://orenklaff.com/bullst

The Last Word

The market loves a spending story until it demands a revenue one. Meta just handed it one.

Bull Street is for informational purposes only. Nothing here is financial advice. Always do your own research.