Feb 6th Pre-Market

Good morning.

The mood right now is simple: show me the money or I'm out.

This week answered a question nobody wanted to ask: what does it actually cost to win the AI race? Amazon just told us. $200 billion. In one year. The earnings were fine. The stock dropped 8%.

Software companies are getting crushed for the opposite reason. Big tech is spending too much on AI. Software is getting sold because AI might make their products worthless. The sector just had its worst week since 2008. Most coverage is treating these as the same story. They're not, and that matters.

The selling is calming down this morning but it’s gotten ugly.

Let's dig in...

Today's Big Picture

1. Amazon's $200B bet: the AI business is working, but nobody cares

AWS hit $35.6B in revenue, growing 24% against a 21% expectation. Margins at 35%. Profit matched at $21.2B. By every measure that matters, the AI business is performing.

The problem is Amazon told investors it plans to spend $200 billion this year on infrastructure. That's roughly double what the street expected. Jassy called it "an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole." Goldman cut its target from $300 to $280 but kept it a buy.

The AI machine is working. The question is whether investors have the patience for the bill.

2. Software just had its worst week since 2008

The iShares Software ETF (IGV) fell another 5% Thursday. That's over 11% on the week. Worst since 2008.

Here's the thing most coverage is getting wrong: this is not the same sell-off as big tech. Big tech is selling because they're spending too much on AI. Software is selling because AI might replace their products. Those are opposite problems, and the recovery for each will look nothing alike.

3. The panic trade is running out of sellers

Bitcoin hit $61K overnight, its worst drop since 2022, then climbed back above $67K. $2B in liquidations this week. Strategy $MSTR posted a $12B loss Thursday but is up 6% premarket. Forced selling looks spent.

VIX down 8% this morning. Gold bounced 3%. The sell-everything move that started Tuesday looks like it's finding a floor.

Two things helping stabilize: India pushed back on rumors it's dumping U.S. Treasuries, with the RBI governor calling it "normal reserve fluctuations." And China's central bank tightened crypto rules, banning entities from issuing virtual currencies without approval. Both reduce uncertainty.

Market Overview

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Stock Spotlight (pre-market)

Amazon $AMZN ( ▼ 5.49% ) 
Earnings actually beat on revenue ($213.4B vs $211.3B expected) and AWS grew 24%, but the $200B capex guide for 2026 spooked everyone. EPS missed by two cents. Goldman cut its target to $280, kept it a buy. Also filed a mixed shelf offering, size undisclosed.

Stellantis $STLA ( ▼ 23.64% ) 
On pace for its largest single-day drop ever. Booking $26B in charges after overestimating EV demand. Expects a net loss up to $26b in the second half and flagged €1.6B in tariff costs on top of it. Previous record for predecessor Fiat was 18% during Covid panic.

Roblox $RBLX ( ▲ 10.05% ) 
Guided for revenue growth up to 29% this year on higher bookings and daily active users. One of the few bright spots in a brutal week for tech.

Molina Healthcare $MOH ( ▼ 25.72% ) 
Forecast a sharp profit drop and said it's exiting Medicare Advantage Part D entirely by 2027.

Strategy $MSTR ( ▲ 25.32% ) 
Bouncing after four straight days of losses. Posted a $12B loss Thursday night. Still entirely a leveraged bitcoin bet.

Hims & Hers $HIMS ( ▼ 2.07% ) 
Announced a cheaper copycat of Novo Nordisk's weight loss pill Thursday. Stock spiked 15% on the news, reversed after Novo called it "illegal" and threatened legal action. Closed at a 12-month low.

Reddit $RDDT ( ▼ 6.98% ) 
Beat on earnings, guided higher for 2026, announced a $1B buyback. Needham reiterated buy with a $300 target, calling it their top pick for 2026 because Reddit is 100% human-created content in an increasingly bot-filled internet.

What to Watch

Consumer sentiment, 10:00 AM ET 
The University of Michigan releases its preliminary February reading. Wall Street expects a modest decline to 55. Fed Vice Chair Philip Jefferson speaks at noon at Brookings on supply-side inflation. If sentiment cracks while the Fed is still talking about inflation, that's a problem for the rate cut timeline.

U.S.-Iran talks 
Another round of negotiations in the coming days per Axios, with top military leaders present. Oil is already soft today (crude down 0.8%). Any headline on a deal or a breakdown moves energy prices immediately.

India-U.S. trade
India reportedly ready to buy up to $80B in Boeing aircraft as part of a broader trade deal. Also waiving tariffs on industrial imports from four European nations in exchange for $100B in investment over 15 years. Defense and aerospace names could move on this.

Thanks for reading 🙂

- John

Today’s Sponsor

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