Proflex Sep 28–Oct 2 — Bonds vs Equity, Muse Launch, Semis $600, Oracle Bottleneck

Insights from the Proflex Macro Call

The bond market is not finding buyers at 5%. The market assumed 5% would pull money out of equities and into bonds. It has not. Foreign demand from buyers like China has faded, and for a fund in Asia, a Google or Amazon bond is now as good a dollar asset as a Treasury. Those same companies, plus private credit deals for AI, are adding to the supply.

Volatility says the market is not panicking. The VIX spiked around the VIX options expiry and came straight back. Equity is still seen as the best place to be, because of what Raman calls "the AI promise".

Meta’s Muse is the first mass market AI launch from a company that already has the users. ChatGPT had to start from zero. Meta starts with its distribution. That is why Muse matters more than another model release.

The index is near its high while the AI leaders are not. Alphabet and Amazon are well below their highs. The rally is being led by momentum names like AMD and Intel. For the S&P to break out, the discounted leaders just need to join in.

Earnings are where the rubber hits the road. Two years of spending drove this market. From October, investors want to see monetization.

You can watch the complete recording here: Bonds vs Equity: Are We Close to a Decision Point?

Key Drivers This Week

Bonds Hit A 19 Year High, And Nobody Sold Stocks

The move was driven by growth, not fear. S&P Global’s September PMI showed US business activity at a more than five year high, with new orders surging and price pressures broadening. Fed Governor Barr said the Fed will "likely need to deliver further interest rate hikes". Futures now put the odds of an October 28 hike at 75.8% (CME FedWatch).

Last week we said the Fed going from "will it hike" to "how many" would not break this market, and that we saw it adjusting to higher rates. The long end did not hold 5%. It went through it. And the S&P still rose 1.2% on the week, within 0.7% of its 7,799 record close.

Proflex View: A 10 year at 5.18% is a real cost of capital, and it is showing up where it should: in utilities, real estate and small caps (the Russell 2000 fell 0.8%). The rest of the market is looking past it because growth is strong. The line that matters is 5%. A move back toward it calms everything. A push toward 5.5% on the 10 year starts to compete with equities for real.

Muse Takes AI Beyond The Developers

Meta launched Muse on September 8. By September 18 it was the number one app on the US App Store, and it has held the spot since. Sensor Tower puts downloads at more than 3.4 million, with daily download growth averaging 55% in its first two weeks, against 24% for ChatGPT’s first ten days (TechCrunch, Bloomberg). It launched only in North America.

The market read it immediately. Meta rose close to 13% on the week. AMD, which supplies Meta with both GPUs and EPYC CPUs under a 6 gigawatt deal, closed at a record and briefly passed a $1 trillion market value. Intel and Arm followed, on the view that agents running around the clock need far more CPUs. Microsoft rose 3.7% on Friday to its highest close of the year after relaunching Copilot with coding and an always on "Autopilot" agent.

And at the enterprise end, Anthropic is now targeting a November IPO, with annualized revenue expected to pass $100 billion this year, up from about $9 billion at the end of 2025 (New York Times, Wall Street Journal).

Proflex View: For six months the AI story was about developers and coding. Muse is the first proof that a consumer AI product can scale on distribution alone. That changes the demand math for everything underneath it, CPUs and memory as much as GPUs. The Q3 earnings season will show whether it shows up in revenue.

Semis Hold The $600 Line

Last week we said a close above $600 on the semiconductor ETF was the level that confirms the AI trade is leading again. It closed above $600 on four straight days from Tuesday and finished Friday at $606.56, up 5.9% on the week. The Nasdaq printed back to back record closes at 27,122 and 27,244 on Monday and Tuesday.

It is not yet a clean breakout. The ETF is still about 9% below its June record, and the Nasdaq gave back part of its gains midweek. Raman’s point is that the room above is large. AMD is up about 195% this year and Apple closed at a record, while Alphabet (-14.6%), Intel (-12.7%) and Amazon (-12.1%) remain well below their highs.

Proflex View: $600 was the test and it is being passed, not yet confirmed. What confirms it is the laggards joining in. Micron reports on Wednesday after the close, with consensus at $31.56 of EPS on about $51.2 billion of revenue (Alphastreet). That is the next fundamental test of whether AI demand is broadening or just rotating.

Oracle Shows The Other Risk: Bottlenecks

On September 24, Oracle sent Blue Owl a force majeure notice on Project Jupiter, its New Mexico data center. The notice lets Oracle delay rent if the site is not running by 2028. Oracle is still bound to pay the debt costs and cannot end the lease (Bloomberg, Reuters). The campus could cost up to $165 billion once built. Its $18 billion of construction loans trade below 90 cents on the dollar, Oracle’s 2056 bonds yielded above 8% for the first time, and the cost to insure its debt hit a record 237 basis points. Oracle fell 3.5% on Thursday. Blue Owl fell 3.6%.

Proflex View: This is the bear case in one company, and it is not a demand problem. Oracle has the backlog. What it cannot get is power, permits and delivery on time. The risk to the AI trade is not that nobody wants the capacity. It is that the capacity arrives late while the debt keeps accruing. Watch financing spreads on AI projects as closely as the stock prices.

🔍 What We’re Watching

• Two weeks ago we named Brent at $120 as the trigger for a real correction. Brent settled at $104.32 on Friday, up 0.4% on the week, as hopes for a US and Iran deal grew
• The 10 year against 5%, and whether PCE on Wednesday (headline forecast about 3.6% y/y, core about 3.2%) pushes October hike odds above 80%
• Micron results on Wednesday: memory margins and the AI demand read through
• The September jobs report on Friday: consensus 100,000, unemployment 4.2%
• Whether the semiconductor ETF can hold above $600 and the laggards join in
• OpenAI DevDay on Tuesday and the start of Q3 bank earnings in about two weeks

🧭 Proflex Playbook – Own the Payoff, Respect the Cost of Money​​
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​A 5% 10 year is a real cost of capital, and it punishes the businesses that need cheap money to deliver. Stay with the AI leaders that already have the users and the cash flow, add to the discounted leaders as they join in, and be selective with anything that depends on debt to get capacity built on time.
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Our conviction stays anchored in the data:

• Focus on Structural Growth: Continue to overweight the secular AI theme, recognizing its multi-year runway.
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• Anticipate Shallow Corrections: Use dips as accumulation opportunities, not reasons for fear, understanding that "none of the corrections stick."
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• Diversify Thoughtfully: Recognize the "decorrelation" across asset classes; consider gold, silver and Bitcoin for portfolio resilience.
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• Develop Mental Models: Prioritize long-term planning (6-12 months out) over short-term news, aiming for consistent, incremental gains.

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If you're an All-Access or Managed Portfolio subscriber, our positioning has already shifted ahead of this moment—scaling up asymmetric hard asset plays while hedging for earnings volatility and geopolitical tail risks.

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Until next week,
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— The Proflex Team
​ Trusted Macro Insights. Calm Investing. Tactical Trades.